The first case of AI-generated music emerges: musician Michael Smith faces more than $10 million in fraud charges

A musician from Cornelius, North Carolina, has been charged with wire fraud conspiracy, wire fraud, and money laundering conspiracy for allegedly orchestrating a scheme to exploit music streaming platforms.

Michael Smith, aged 52, reportedly used artificial intelligence to generate music and employed automated bots to inflate streaming numbers, resulting in over $10 million in royalties between 2017 and 2024.

Damian Williams, U.S. Attorney for the Southern District of New York, said in a statement against Michael Smith.

Through his brazen fraud scheme, Smith stole millions of dollars in royalties that should have been paid to musicians, songwriters and other rights holders whose songs were legitimately played.

Details of AI streaming fraud case

Songwriters, musicians and other rights holders receive royalties every time a listener plays a song on platforms like Amazon Music, Apple Music, Spotify and YouTube Music.

Smith’s alleged method involved creating hundreds of thousands of AI-generated songs. These tracks were then promoted using fake accounts and bots, enabling Smith to accumulate approximately 661,440 streams per day. This volume of streams translated to around $1.2 million annually, according to the indictment.

On Oct. 20, 2017, Smith emailed himself a financial breakdown showing he had 52 cloud service accounts, each with 20 bot accounts on streaming platforms, for a total of 1,040 bot accounts, according to the indictment.

To avoid detection, Smith spread artificial streams to tens of thousands of songs, each with a smaller number of streams to appear more credible. At its peak, Smith generated approximately 661,440 streams per day, resulting in his own annual royalties exceeding $1.2 million, the indictment alleges.

On October 4, 2018, Smith emailed two unnamed co-conspirators, "In order not to raise any questions with those in power, we need a lot of content and a little streaming."

To power operations, Smith partnered with an AI music company and a music promotion company to create hundreds of thousands of AI-generated songs. The music company and promoter were not named in the indictment.

The songs were given ridiculous names and pseudonyms of the artists to imitate legitimate music, making detection even more complicated. For example, the song titles are "Zygotes" and "Zymoplastic," and the artists include "Calm Baseball," "Calorie Screams" and "Camel Edible."

On or about December 26, 2018, Smith emailed two co-conspirators: “We need to get a lot of songs fast to do this around the anti-fraud policies that these guys are all using now.

Michael Smith faces up to 20 years in prison

The case was prosecuted by the Complex Fraud and Cybercrime Unit of the Office of the Southern District of New York, with Assistant U.S. Attorneys Nicholas Chiuchiolo and Kevin Mead leading the prosecution.

Michael Smith was charged with wire fraud conspiracy, wire fraud and money laundering conspiracy. If convicted, each charge carries a maximum penalty of 20 years in prison.

Smith will appear before a U.S. District Judge in North Carolina. The U.S. Attorney's Office did not specify when.