Michael Smith, a North Carolina man, pleaded guilty Thursday to conspiracy to commit wire fraud in the Southern District of New York, admitting to a scheme that used artificial intelligence and automated accounts to fraudulently collect more than $8 million in music streaming royalties. The case followed a yearslong federal investigation and was announced by the U.S. Department of Justice. Smith has agreed to forfeit the royalty payments and faces up to five years in prison. Sentencing is scheduled for July 29.
According to prosecutors, Smith created thousands of AI-generated songs and streamed them billions of times using automated bots to simulate listener activity. Rather than focusing streams on a small number of tracks, he spread activity across a large catalog to avoid detection systems designed to flag irregular patterns. The catalog included both his own recordings and hundreds of thousands of AI-generated tracks, enabling the operation to scale significantly.
When Smith was first charged in September 2024, federal prosecutors said he had created thousands of accounts on streaming platforms to artificially inflate play counts on songs he owned. Software he used generated roughly 661,440 streams per day, producing approximately $1.2 million in annual royalties. He was released on a $500,000 bond the following month.
Streaming platforms including Spotify, Apple Music, Amazon Music, and YouTube Music distribute royalty payments based on play counts, a system that creates a financial incentive to artificially inflate stream numbers. Prosecutors said Smith exploited this structure by diverting payments away from legitimate artists and rights holders. “Although the songs and listeners were fake, the millions of dollars Smith stole was real,” said U.S. Attorney Jay Clayton.
Clayton stated that Smith used AI and automated bots to manufacture the appearance of popularity and collect royalties that rightfully belonged to real artists. “Smith’s brazen scheme is over, as he stands convicted of a federal crime for his AI-assisted fraud,” Clayton said. Attorneys for Smith did not respond to requests for comment.
The case emerges at a time when AI music generation tools have become widely accessible, with platforms such as Suno, Udio, and Google‘s Lyria enabling users to produce songs with vocals, lyrics, and instrumentation from simple text prompts. The rapid expansion of these tools has made it possible to generate large catalogs of tracks quickly and at low cost. The technology has simultaneously raised broader questions about copyright, ownership, and how streaming services manage AI-generated content.
Prior to the investigation, Smith had spent years pursuing a music career, including charting songs and working with industry collaborators, according to a January report by Rolling Stone. Prosecutors noted that his turn to AI-generated content was driven by the need to amass a sufficiently large catalog to sustain the scheme. The case is widely seen as an early test of how federal authorities will respond to fraud enabled by rapidly advancing generative AI tools in the music industry.
Originally reported by Decrypt.
