An artificial intelligence (AI) music scandal in North Carolina was recently foiled and now, a musician faces fraud charges over his multi-million dollar royalty scheme.
In a sensational case that’s rocking the music industry, Michael Smith stands accused of masterminding a high-tech fraud scheme that netted him over $10 million in royalties. The shocking revelation? Smith allegedly used AI and thousands of bots to artificially inflate the streaming numbers of AI-generated songs, reaping massive profits in the process.
Smith, 52, has been charged with three counts of wire fraud, wire fraud conspiracy and money laundering conspiracy. Federal prosecutors have called this the first criminal case of its kind, marking a dark chapter for the music industry.
“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,” U.S. Attorney Damian Williams said, detailing the severity of the accusations.
According to an unsealed indictment, Smith reportedly operated as many as 10,000 automated bot accounts to stream AI-generated music across multiple platforms like Spotify and YouTube. The result? Billions of fraudulent streams that flew under the radar of detection systems.
The indictment reveals that Smith had partnered with an unnamed AI music company starting in 2018, receiving thousands of tracks monthly from the company’s CEO. In exchange for a cut of the streaming revenue, Smith provided metadata such as artists’ names and song titles, which made the scam even more difficult to trace. In a damning 2019 email revealed in the indictment, the AI company’s executive wrote to Smith: “Keep in mind what we’re doing musically here… this is not ‘music,’ it’s ‘instant music.'”
By 2023, Smith was boasting of his “success,” claiming that his AI-driven operation had garnered more than four billion streams and $12 million in royalties since 2019.
The FBI’s acting assistant director Christie M. Curtis commented, “The FBI remains dedicated to plucking out those who manipulate advanced technology to receive illicit profits and infringe on the genuine artistic talent of others.”
If convicted, Smith could face decades behind bars. The case shines a harsh spotlight on the dangers of AI-generated music and the murky ethics surrounding its use. Just this year, artists including Billie Eilish and Elvis Costello signed a letter calling for the end of what they described as the “predatory” use of AI in the music industry.
Watch the video above for more details on the lucrative scheme.