US Man Pleads Guilty to Defrauding Music Streamers Out of Millions Using AI
Michael Smith, a 52-year-old resident of Cornelius, North Carolina, has pleaded guilty to conspiracy to commit wire fraud in a landmark case targeting AI-related deception in the music business. This prosecution represents one of the first successful legal actions against such fraud, which threatens to overwhelm streaming services and deprive legitimate musicians of earnings.
Scheme Involving AI Songs and Bot Farms
Smith admitted to flooding music streaming platforms with thousands of AI-generated songs and using automated "bots" to artificially inflate listen counts into the billions. According to federal prosecutors in New York's southern district, this scheme fraudulently obtained over $10 million in royalty payments between 2017 and 2024, with annual royalties reaching approximately $1,027,128.
US attorney Jay Clayton stated, "Michael Smith generated thousands of fake songs using artificial intelligence and then streamed those fake songs billions of times. Although the songs and listeners were fake, the millions of dollars Smith stole was real. Millions of dollars in royalties that Smith diverted from real, deserving artists and rights holders."
Impact on the Music Industry
The case highlights a growing crisis for the music industry, which had recovered from earlier piracy issues like Napster only to face new AI-based threats. Streaming services such as Amazon Music, Apple Music, Spotify, and YouTube Music operate on a model where artists are paid from a pool of funds based on stream counts. AI-generated music and bot-driven plays divert these funds away from human musicians and copyright holders.
An X commentator noted that Smith used "AI to make the music AND the audience," earning about $1.2 million annually for "music no human ever actually listened to." This underscores the challenge of combating songs that don't exist being streamed by non-existent listeners.
Legal Consequences and Industry Response
Under his plea agreement, Smith faces up to five years in prison and must forfeit $8,091,843.64 when sentenced in July. The prosecution emphasized that his actions stole "millions in royalties that should have been paid to musicians, songwriters, and other rights holders whose songs were legitimately streamed."
Meanwhile, the industry is grappling with the rise of generative AI music. Companies like Suno, which has 2 million subscribers, allow users to create AI-generated tracks, disrupting traditional creation processes. According to Billboard, Suno produces 7 million songs daily, equivalent to a streamer's entire catalog every two weeks. Much of this output is passably similar to human-composed music but often lacks artistic depth.
French streaming service Deezer reports that 97% of people cannot distinguish between human and AI-generated music, with 60,000 fully AI tracks delivered daily. In response, Spotify has removed 75 million spam tracks in the past year to combat fake music.
Broader Implications and Policy Shifts
The issue has sparked policy debates, such as the UK government abandoning plans to let AI companies use copyrighted works without permission, a move opposed by artists like Elton John and Paul McCartney. Suno's CEO, Paul Sinclair, expressed conflict over the technology's impact, stating, "This s--t is complicated ... I want to make sure there's whole future generations of the beauty of art and music and the ability to build careers around it."
This case serves as a warning to those exploiting AI for fraudulent gains in the digital music landscape, emphasizing the need for stronger regulations and industry vigilance.
