Man Faces Fraud Charges for Elaborate AI Music Scheme Which Amassed Nearly $10 Million

Michael Smith, a musician from North Carolina, was recently apprehended and charged in an elaborate fraud scheme utilizing AI-generated songs and manipulated streaming data. This is the first criminal prosecution dealing with AI-generated music and streaming platforms. With these charges, the ethical questions involved with the use of artificial intelligence in creative arts are brought to light.

The FBI levied an extensive investigation against Smith. Additionally, the United States Attorney’s Office for the Southern District of New York also brought severe allegations against him. According to a statement from the Attorney’s Office, Smith amassed nearly $10 million in illicit royalties from his streaming scheme.

U.S. Attorney Damian Williams stated, “As alleged, Michael Smith fraudulently streamed songs created with artificial intelligence billions of times in order to steal royalties. 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.”

North Carolina Man Arrested and Charged in Elaborate AI Music Streaming Scheme

According to the unsealed indictment, Smith began the scheme around 2017 and continued up until this year. The streaming services involved included Spotify, Apple Music, Amazon Music, and YouTube Music, which make up the majority of digital streaming platforms. Smith allegedly tricked them all.

The indictment states that Smith “purchased from a coconspirator hundreds of thousands of songs that were created through artificial intelligence and then uploaded to the Streaming Platforms. Smith then used “bots”—automated programs—to stream the AI-generated songs billions of times.”

Smith estimated that at his peak, the bot accounts were able to generate 661,440 streams in a single day. This would bring in annual royalties of $1,207,128. One of the biggest questions is how did Smith avoid detection? Spotify, for example, took measures this past April to detect fraudulent streaming. This included charging labels a fee when fraudulent streams were detected.

However, Smith avoided this by spreading the fraudulent streams over tens of thousands of different songs. That way, at least on Spotify, the fake streams were less likely to be detected. If he loaded the streams onto one song, however, the fraud would have been easily detected.

Smith began working with AI-generated music in 2018, partnering with the CEO of an AI music company according to the indictment. They began giving the tracks and “artists” names to bolster the supposed legitimacy of the songs. If you’ve ever listened to “Calliope Bloom,” “Callous Humane,” and “Calm Innovation,” you’ve most likely been streaming fake music.

Michael Smith is facing three charges in this case—wire fraud conspiracy, wire fraud, and money laundering conspiracy. Each charge carries a maximum sentence of 20 years in prison.

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