A North Carolina man, Michael Smith, has been arrested for allegedly earning more than $10 million in music-streaming royalties through a fraudulent scheme involving AI-generated tracks and fake streaming accounts. The 52-year-old is accused of publishing hundreds of thousands of tracks and streaming them billions of times using bot accounts he programmed to mimic real listeners. The case, which is the first of its kind, highlights growing concerns over the misuse of AI in the music industry.
A “Brazen” Scheme
According to an unsealed indictment, Smith began his operation in 2017, attempting to produce large quantities of music either by himself or with other artists. However, he later teamed up with the unnamed CEO of an AI music company and a music promoter, who supplied him with vast volumes of AI-generated tracks. These tracks were then uploaded to music streaming platforms, where they were streamed by fake bot accounts that Smith had created.
Prosecutors, led by Damian Williams, the U.S. Attorney for the Southern District of New York, stated that Smith stole millions of dollars in royalties that should have gone to legitimate musicians and rights holders. “Smith stole millions in royalties that should have been paid to musicians, songwriters, and other rights holders whose songs were legitimately streamed,” said Williams.
Smith was arrested on charges including wire fraud, wire fraud conspiracy, and money laundering conspiracy, with authorities saying this is the first case of its kind they’ve prosecuted.
AI-Generated “Instant Music”
The tracks involved in the scheme were labeled with cryptic names like “n_7a2b2d74-1621-4385-895d-ble4af78d860.mp3,” which Smith then rebranded with fictitious song titles and artist names. Examples of these fabricated artists include “Zygopteris” and “Calvinistic Dust,” while tracks were named “Zygotic Washstands” and “Zygophyllum.”
An email from the AI music company CEO to Smith in 2019 underscores the nature of their operation: “Keep in mind what we’re doing musically here… This is not ‘music,’ it’s ‘instant music’ ;)” The generated tracks were essentially filler content, devoid of artistic merit, created purely to game the streaming system.
To scale the operation, Smith created software that streamed these tracks across multiple computers, simulating listeners from various locations. He also purchased thousands of email addresses to set up as many as 10,000 streaming accounts, later outsourcing parts of the process to paid assistants.
Billions of Streams, Millions in Royalties
Prosecutors estimate that by 2019, Smith’s scheme was generating around $110,000 per month, with a portion of the earnings being shared with his collaborators. By February of this year, Smith claimed in an email that he had achieved 4 billion streams and amassed $12 million in royalties since the start of the scheme.
Smith’s operation strategically spread the fake streams across a vast catalog of songs to avoid detection, ensuring no one track garnered too much attention. Despite this, by October 2018, one platform had flagged suspicious activity and informed Smith that it had received “multiple reports of streaming abuse,” threatening to remove his songs.
AI and Copyright Concerns
This case shines a light on broader concerns regarding the impact of AI on the music industry, where generative AI tools can produce music without the involvement of human artists. These AI systems often rely on training data that includes copyrighted works, raising questions about whether the original creators are being fairly compensated.
The issue has sparked backlash within the entertainment industry, with many high-profile artists signing an open letter earlier this year demanding action against the “predatory” use of AI in music production. Meanwhile, major music labels have already taken legal action, suing AI start-ups for copyright infringement. These lawsuits could serve as key tests for the business models of generative AI companies, as the legal system grapples with how to regulate AI-generated content.
Looking Ahead: The Legal Ramifications
Michael Smith’s arrest marks a pivotal moment in the intersection of AI and the music industry, as it’s the first known case of AI-generated music fraud on such a massive scale. The FBI’s involvement in the investigation underscores the seriousness of the charges, and the case could set a precedent for how future legal battles involving AI in creative industries are handled.
As AI music-generation technology improves and becomes more widespread, streaming platforms and industry regulators will face increasing pressure to safeguard legitimate artists from fraud and copyright violations. The Smith case serves as a cautionary tale for how AI, when used unethically, can be exploited to undermine the traditional music industry and the artists who rely on it for their livelihoods.
For now, Smith awaits trial, where he faces charges that could lead to significant prison time if convicted. The case signals that law enforcement is willing to pursue individuals who misuse AI technologies for fraudulent purposes, especially when it involves manipulating creative industries like music.
