US Man Charged In Historic AI Music Fraud Case: Used Thousands Of Bots To Stream Fake Songs, Raked In $10M In Royalties

An American musician is accused of illegally using AI tools and thousands of bots to generate billions of song streams, leading to millions of dollars in unmerited royalties.

Michael Smith, a North Carolina resident, is facing three charges: wire fraud, wire fraud conspiracy, and money laundering conspiracy. Prosecutors claim they have never encountered a criminal case of this nature before.

"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," said US attorney Damian Williams.

The indictment detailing the charges against Smith, 52, alleges that he used hundreds of thousands of AI-generated songs to manipulate streaming numbers. In a similar incident in May, a Chinese man was caught using thousands of smartphones to inflate his live-stream viewer counts artificially.

This fraudulent scheme allowed the Chinese scammer to accumulate 3 million yuan (approximately £332,435.75) in less than four months. In Smith's case, thousands of automated bot accounts were used to stream his AI-generated tracks billions of times on a wide range of platforms, helping him evade detection.

Authorities allege that Smith, through his fraudulent scheme, claimed over $10 million in royalty payments over several years. Working with the FBI, prosecutors have finally caught up with Smith and are gearing up to hold him accountable for his actions.

"The FBI remains dedicated to plucking out those who manipulate advanced technology to receive illicit profits and infringe on the genuine artistic talent of others," said FBI acting assistant director Christie M. Curtis.

AI-Generated Tracks And Bot Accounts

The indictment accuses Smith of using approximately 10,000 active bot accounts to stream his AI-generated tracks. Smith allegedly obtained these tracks through a partnership with the chief executive of an unnamed AI music company, whom he approached in or around 2018.

"Keep in mind what we're doing musically here... this is not 'music,' it's 'instant music' ;)," the executive wrote to Mr Smith in a March 2019 email, as revealed in the indictment.

According to the indictment, the email exchange between Smith and his fellow conspirators indicates that the technology behind the AI-generated tracks continued to evolve, making it increasingly difficult for platforms to detect fraudulent streaming activity.

In a February email, Smith informed other participants in the scheme that his "existing music" had generated over 4 billion streams and $12 million in royalties since 2019. If found guilty of the charges, Smith could face decades in prison.

Spotify, Apple Music, YouTube, and other music streaming platforms have implemented restrictions to prevent users from artificially inflating their stream counts and gaining undeserved royalties. These companies have actively discouraged users from engaging in this practice.

In April, Spotify announced revised royalty policies to combat artificial streaming. Under these new policies, labels and distributors will be charged per track if artificial content streams are detected.

In addition, Spotify increased the number of streams required for a track to earn royalties within a 12-month and extended the minimum length for noise recordings like white noise tracks.

Concerns For Artists And Labels

The skyrocketing popularity, widespread growth of AI-generated music, and effortless access to track-creating tools have caused artists and record labels to worry about receiving their fair share of profits made on AI-created tracks.

AI tools capable of generating text, images, video, and audio in response to prompts are trained on vast amounts of data scraped indiscriminately from the internet, including online text and images. These tools even use copyrighted content and content belonging to artists as part of their training data.

Artists across creative industries are outraged that their work is being used to create new material without formal credit or reward. In retort to one such incident last year, platforms removed a track that had cloned the voices of Drake and The Weeknd after it went viral and appeared on streaming services.

Earlier this year, renowned artists, including Billie Eilish, Chappell Roan, Elvis Costello, and Aerosmith, signed an open letter urging an end to AI's "predatory" use in the music industry.