Michael Smith, 52, of Cornelius, was arrested Wednesday and is charged with wire fraud conspiracy, wire fraud and money laundering conspiracy, the U.S. Attorney for the Southern District of New York said in a news release. Each charge carries up to 20 years in prison if convicted.
Smith’s complex scheme used automated programs, or “bots,” to stream songs created with artificial intelligence, according to an indictment released Wednesday by the U.S. Attorney’s office and the FBI’s New York Field Office.
He then used the bot accounts to stream those songs billions of times across multiple streaming platforms to boost his royalties to over $10 million, according to the indictment.
“Through his brazen fraud scheme, Smith stole millions in royalties that should have been paid to musicians, songwriters and other rights holders whose songs were legitimately streamed,” Damian Williams, the U.S. attorney for the Southern District of New York, said in a statement.
About the AI streaming fraud case
Each time a song is streamed on platforms such as Amazon Music, Apple Music, Spotify and YouTube Music, the songwriter, musician and other rights holders receive royalty payments.
Smith’s scheme ran from 2017 through 2024, according to the indictment. It diverted funds from musicians and songwriters whose songs were streamed by real consumers by falsely creating the appearance of legitimate streaming, authorities said.
In other words, Smith’s fraudulent activities involved misrepresenting information to the streaming platforms, creating false accounts, and disguising the true nature of the streams, using bot accounts rather than human listeners, according to the indictment.
Smith used software to continuously stream songs he owned, according to the indictment. He also allegedly paid co-conspirators and people overseas to sign up for bot accounts. Smith used false names to sign up bot accounts and used debit cards in fake names to pay for the accounts, the indictment stated.
On Oct. 20, 2017, Smith emailed himself a financial breakdown showing he had 52 cloud service accounts, each with 20 bot accounts on streaming platforms, for a total of 1,040 bot accounts, according to the indictment.
To avoid detection, Smith spread the artificial streams across tens of thousands of songs, where each streamed a smaller number of times to appear more credible. At its peak, Smith generated about 661,440 streams per day, resulting in annual royalties to himself exceeding $1.2 million, according to the indictment.
On Oct. 4, 2018, Smith emailed two unnamed co-conspirators that, “in order to not raise any issues with the powers that be we need a TON of content with small amounts of Streams,” according to the indictment.
To fuel the operation, Smith collaborated with an AI music company and a music promoter to create hundreds of thousands of AI-generated songs. The music company and promoter are not named in the indictment.
The songs were given nonsensical names and artist pseudonyms to mimic legitimate music, further complicating detection. Names of songs, for example, were “Zygotes” and “Zymoplastic,” and artists included “Calm Baseball,” “Calorie Screams” and “Camel Edible.”
Around Dec. 26, 2018, Smith emailed two co-conspirators saying: “We need to get a TON of songs fast to make this work around the anti-fraud policies these guys are all using now.”
Handling the streaming fraud case
The case is being prosecuted by the Southern District of New York Office’s Complex Frauds and Cybercrime Unit, with Assistant U.S. Attorneys Nicholas Chiuchiolo and Kevin Mead leading the prosecution.
Smith is set to appear before a U.S. Magistrate Judge in North Carolina. The U.S. Attorney’s Office did not say when.
Officials with the U.S. Attorney’s Office Southern District of New York did not immediately respond to requests for comment Wednesday.
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