Feds Charge AI Music Maker for Faking Streams In $10 Million Scheme

A musician from Cornelius, North Carolina has been charged with wire fraud conspiracy, wire fraud, and money laundering conspiracy in connection with a years-long scheme to manipulate music streaming platforms and pocket over $10 million in royalties with AI-generated songs.

From 2017 to 2024, Michael Smith, 52, allegedly used AI to generate songs and automated bots to inflate listener numbers across music streaming platforms. While the services used were not disclosed, major players like Spotify, Apple Music, and YouTube Music pay royalties to artists based on how popular they are.

The case against Smith was announced Wednesday by the U.S. Attorney's Office for the Southern District of New York.

“Michael Smith fraudulently streamed songs created with artificial intelligence billions of times in order to steal royalties,” U.S. Attorney Damian Williams said in an official press release. “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.”

Rates paid are typically a fraction of a penny per listen—so raising a substantial sum requires a staggering number of streams.

Smith’s method involved publishing hundreds of thousands of computer-generated tracks. Then, by using thousands of fake accounts and bots, Smith was able to generate around 661,440 streams per day—translating to approximately $1.2 million in annual royalties, the indictment said.

Smith allegedly told his accomplices that the scheme needed to flood the platforms with content. "We need to get a ton of songs fast to make this work around the anti-fraud policies these guys are all using now," he said in an email cited in the complaint.

“The defendant eventually turned to artificial intelligence to expand his fraudulent scheme, and in turn, his illicit proceeds,” the DOJ argues. “In or about 2018, Smith began working with the chief executive officer of an AI music company and a music promoter to create hundreds of thousands of songs using artificial intelligence that [he] could then fraudulently stream.”

Smith’s co-conspirators knew that such audio generations might not be considered music in its pure form. They called their experiment “instant music,” according to emails cited by the DOJ.

There is no mention of the AI service used to generate songs, but there are some very advanced music generators that can create good enough music in seconds. Udio and Suno are the two most popular ones, but some open-source experiments like Stable Audio 2 can be trained and fine-tuned based on specific user preferences.

This is murky terrain, though. AI music is not entirely banned, and Smith is not being sued for using AI. In fact, AI music is actually allowed on streaming platforms as long as they don’t violate any of the policies that apply to human-made songs. There are even platforms that focus entirely on streaming AI music and other types of AI-generated content.

However, some artists are already questioning the legality of AI generations, arguing that the training datasets used to develop such advanced models unfairly uses the product of their work without providing any compensation or asking for any permission.

The indictment details the absurdity of some of Smith’s AI-generated songs, featuring titles like “Zygophyllaceae” and “Zymotechnical,” and attributed to fictitious artists such as “Calypso Xored” and “Camel Edible.” Despite their nonsensical nature, these tracks logged a flood of streams thanks to Smith’s bot network.

Even when streaming platforms flagged the suspicious activity, Smith denied wrongdoing. In a communication to one of his distributors, he claimed, "I have done nothing to artificially inflate the streams on my two albums... I have not done a thing to illegally stream my music," according to the indictment.

However, in a February 2024 email cited in the indictment, Smith allegedly boasted that his music “has generated at this point over 4 billion streams and $12 million in royalties since 2019."

Each of the charges against Smith—wire fraud conspiracy, wire fraud, and money laundering conspiracy—carries a maximum sentence of 20 years in prison.

"Thanks to the work of the FBI and the career prosecutors of this office, it's time for Smith to face the music," Williams said.