On Wednesday, federal prosecutors charged a North Carolina musician with defrauding streaming services of $10 million through an elaborate scheme involving AI, as reported by The New York Times. Michael Smith, 52, allegedly used AI to create hundreds of thousands of fake songs by nonexistent bands, then streamed them using bots to collect royalties from platforms like Spotify, Apple Music, and Amazon Music.
While the AI-generated element of this story is novel, Smith allegedly broke the law by setting up an elaborate fake listener scheme. The US Attorney for the Southern District of New York, Damian Williams, announced the charges, which include wire fraud and money laundering conspiracy. If convicted, Smith could face up to 20 years in prison for each charge.
Smith’s scheme, which prosecutors say ran for seven years, involved creating thousands of fake streaming accounts using purchased email addresses. He developed software to play his AI-generated music on repeat from various computers, mimicking individual listeners from different locations. In an industry where success is measured by digital listens, Smith’s fabricated catalog reportedly managed to rack up billions of streams.
To avoid detection, Smith spread his streaming activity across numerous fake songs, never playing a single track too many times. He also generated unique names for the AI-created artists and songs, trying to blend in with the quirky names of legitimate musical acts. Smith used artist names like “Callous Post” and “Calorie Screams,” while their songs included titles such as “Zygotic Washstands” and “Zymotechnical.”
Initially, Smith uploaded his own original compositions to streaming platforms but found that his small catalog failed to generate significant income. In an attempt to scale up, he briefly collaborated with other musicians, reportedly offering to play their songs for royalties, though these efforts failed. This led Smith to pivot to AI-generated music in 2018 when he partnered with an as-yet-unnamed AI music company CEO and a music promoter to create a large library of computer-generated songs. The district attorney announcement did not specify precisely what method Smith used to generate the songs.
The scheme was lucrative. In a 2017 email to himself, Smith calculated that he could stream his songs 661,440 times daily, potentially earning $3,307.20 per day and up to $1.2 million annually. By June 2019, Smith was earning about $110,000 monthly, sharing a portion with his co-conspirators. The NYT reports that in an email earlier this year, he boasted of reaching 4 billion streams and $12 million in royalties since 2019.
When confronted by a music distribution company about “multiple reports of streaming abuse” in 2018, The New York Times says that Smith acted shocked and strongly denied any wrongdoing, insisting there was “absolutely no fraud going on whatsoever.”