The case is a landmark development in the still-developing music streaming market, with the U.S. Attorney’s Office for the Southern District of New York calling it the first criminal case involving artificially inflated music streaming.
In the indictment, the prosecutors say that for the past seven years, North Carolina musician Michael Smith had been running a complex music streaming manipulation scheme to fraudulently profit off of billions of streams from bot accounts.
Smith, 52, was charged with wire fraud conspiracy, wire fraud and money laundering conspiracy, totaling to a combined maximum of 60 years in prison if convicted.
Both streaming fraud and AI music have been hot topics in the music industry in recent years (though the industry has also shown some cautious optimism over AI’s potential as well).
Editor’s picks Streaming payments are doled out through a “pro rata” model in which artists get paid proportionally to how much of the overall streaming pie they’re responsible for.
Given how labor-intensive setting up thousands of accounts would be, Smith paid people in the U.S. and abroad to help, per the indictment.
He allegedly bought family plan accounts as a cheaper way to get his bots signed up.
At first, Smith allegedly tried using a publicist’s music catalog and offered to sell streams to artists to get the scale he needed for the scheme.
Over the years, the AI songs were getting higher quality and harder to detect, the indictment said.
In March 2019, the indictment detailed, Smith had been in direct communication with an unspecified streaming service, asking for his music to be put back online.
A North Carolina man has been charged by federal investigators for a scheme in which he allegedly used hundreds of thousands of AI-generated songs and bot accounts to obtain over $10 million in royalties from the major streaming services.
The case represents a significant advancement in the still-evolving music streaming industry, as the U.S. S. It is the first criminal case involving artificially inflated music streaming, according to the Attorney’s Office for the Southern District of New York.
Michael Smith, a musician from North Carolina, is accused by the prosecutors of operating a sophisticated music streaming manipulation scheme for the previous seven years in order to deceitfully profit from billions of streams generated by bot accounts. The prosecutors stated in the announcement of the indictment that Smith “estimated that he could use the Bot Accounts to generate approximately 661,440 streams per day, yielding annual royalties of $1,207,128” at one point during the charged time period.
Smith, 52, faces a combined maximum sentence of 60 years in prison if found guilty of the three counts of wire fraud conspiracy, wire fraud, and money laundering conspiracy.
Damian Williams, U.S. Attorney, stated, “Smith stole millions in royalties that should have been paid to musicians, songwriters, and other rights holders whose songs were lawfully streamed through his blatant fraud scheme.”. S. Attorney for the Southern District of New York. It’s Smith’s turn to face the consequences now that the FBI and this Office’s career prosecutors have done their part. “.
Smith’s lawyer opted not to respond.
In recent years, the music industry has been discussing two hot topics: streaming fraud and AI music (though the industry has also shown some cautious optimism over AI’s potential). The main labels have expressed concerns about both issues for the same reason: artificial intelligence (AI) songs created with a click of a button can exacerbate the issues of streaming fraud, which dilutes the royalties pool and deprives real musicians of income. At the start of the year, Spotify implemented a new rule that requires at least 1,000 plays before song creators get paid.
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“Pro rata” streaming payment models are used, whereby artists receive payment based on their share of the total streaming revenue. Thus, the fraud “diverts sound royalties away from artists whose sound recordings were legitimately streamed by real consumers,” as stated in the indictment. “.
The DOJ claims that Smith dispersed the streams from his bot accounts over thousands of tracks instead of just a handful in order to evade detection by streaming services. “We need a TON of content with a small number of streams in order not to raise any issues with the powers that be,” he stated in an email that was cited in the indictment document. A comment from Smith could not be obtained right away. ( ).
Smith allegedly attempted to obtain the necessary scale for the plan by first offering to sell streams to artists and utilizing a publicist’s music catalog. Neither of those tactics proved successful, so in 2018, according to the indictment, he turned to artificial intelligence. With access to hundreds of thousands of songs, this technology served as the catalyst for the creation of the streaming farm. According to the lawsuit, Smith collaborated with an unidentified music promoter and the CEO of an AI music company to create hundreds of thousands of AI songs. Smith is only identified as co-conspirator three in this case.
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“What we’re doing musically here… this is not’music,’ it’s ‘instant music,'” the CEO stated in a 2019 email outlining their goals. The AI music CEO and Smith had arranged for the CEO to provide thousands of songs each month in exchange for a 15 percent revenue share for Smith.
The indictment claimed that as time went on, the AI songs became more sophisticated and difficult to identify. According to reports, Smith claimed in an email from February that the song had “generated at this point over 4 billion streams and $12 million in royalties since 2019.”. “.
When the music distribution company he used informed him that they had received claims of streaming abuse from multiple outlets and that the music would be removed, Smith repeatedly denied engaging in streaming fraud, as the indictment states. He wrote, “How can I appeal this? This is completely crazy and incorrect.”.
According to the indictment, Smith had been in direct contact with an unnamed streaming service in March 2019 and requested that his music be restored to the internet. Smith wrote, “You have slandered me to my distributors claiming I’ve had fraudulent streams, however you have provided no proof of this claim, you have not given me an opportunity to defend myself, and you have withheld money that is owed to me.”. “I need you to give me the proof of what you believe was done in an artificial manner. “.
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The Mechanical Licensing Collective had stopped paying Smith due to fraud concerns in another case from the previous year, which was described in detail in the indictment. Once more, Smith and his agent are accused of lying to the MLC about who wrote the music and claiming that “none of Mike’s works are computer-generated creations.”. “.
In response to a question, CEO of the MLC Kris Ahrend stated that the indictment “sheds light on the serious problem of streaming fraud for the music industry.”. The DOJ’s acknowledgement of The MLC’s identification, challenge, and withholding of the associated mechanical royalties in response to the alleged misconduct is further evidence of The MLC’s ongoing efforts to protect songwriters and fight fraud. “.
