North Carolina Man Charged With Music Streaming Fraud Aided By Artificial Intelligence

 
A first-of-its-kind federal indictment was filed in the District Court of Southern New York on September 4, 2024 accusing a man of making over $10 million by falsely boosting streaming numbers for AI-generated music. Michael Smith, 52, of Cornelius, North Carolina, is charged with wire fraud conspiracy, wire fraud and money laundering conspiracy, all of which carry a maximum sentence of 20 years in prison. This demonstrates another threat to artists and a need for fraud-prevention by platforms. 

The federal indictment alleged that Michael Smith used bots to keep “listening” to scores of musical tracks created using generative artificial intelligence on platforms such as Spotify and Apple Music, according to the Justice Department. To obtain the necessary number of songs for his scheme to succeed, Smith turned to artificial intelligence. 

In or about 2018, Smith began working with the Chief Executive Officer of an AI music company (“CC-3”) and a music promoter (“CC-4”) to create hundreds of thousands of songs using artificial intelligence that Smith could then fraudulently stream. CC-3 soon began providing Smith with thousands of songs each week that Smith could upload to the Streaming Platforms and manipulate the streams for. In a 2019 email to Smith, CC-3 wrote: “Keep in mind what we’re doing musically here... this is not ‘music,’ it’s ‘instant music’ ;).

Smith’s hundreds of thousands of AI-generated songs were streamed by his Bot Accounts billions of times, which allowed him to fraudulently obtain more than $10 million in royalties. The defendant made numerous misrepresentations to the Streaming Platforms in furtherance of the fraud scheme. For example, repeatedly lied to the Streaming Platforms when he used false names and other information to create the Bot Accounts and when he agreed to abide by terms and conditions that prohibited streaming manipulation. 

Smith also deceived the streaming platforms by making it appear as if legitimate users were in control of the Bot Accounts and streaming music when, in fact, the Bot Accounts were hard coded to stream the AI music billions of times. He caused the Streaming Platforms to falsely report billions of streams of his music, even though Smith knew that those streams were in fact caused by the Bot Accounts rather than real human listeners.

AI has brought a tremendous scaling power to content creation, and Smith’s indictment is a “warning” for streaming platforms to fortify their fraud-prevention measures against new capabilities. Although a few streamers and music distributors flagged Smith’s activity on their platforms as early as 2018, according to the indictment, he continued the activity for six years before his arrest.

The case is being prosecuted by the Justice Department's Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Nicholas W. Chiuchiolo and Kevin Mead are in charge of the prosecution.

The Charges

18 U.S. Code § § 1343, 1349 - Fraud by wire, radio, or television and attempt and conspiracy

18, U.S. Code § § l956(a)(l )(B)(i) and 1956(h) - Laundering of monetary instruments - Money Laundering