US Man Pleads Guilty to Defrauding Streaming Platforms Out of Millions Using Artificial Intelligence
Fraud always finds a way to reinvent itself, but what just happened to the music industry is on a level few thought possible. A 52-year-old man named Michael Smith, a resident of Cornelius, North Carolina, pleaded guilty to conspiracy to commit wire fraud after deceiving music streaming platforms using artificial intelligence to create thousands of fake songs and automated bots to simulate billions of streams.
The result? More than 10 million dollars in royalties siphoned away from real musicians and songwriters who depended on that money to make a living. And the detail that makes everything even more surreal is that no human being ever actually listened to those songs.
The music was fake, the audience was fake, but the money was very real.
The plea agreement was reached with federal prosecutors in the Southern District of New York, and Smith now faces up to five years in prison, along with restitution of $8,091,843.64, with sentencing scheduled for July. The case is considered one of the first successful convictions involving AI-driven fraud in the music industry, setting an important precedent for future investigations of this kind. 🎵
How the Scheme Actually Worked
To understand the scope of what happened, it helps to visualize how this scheme was meticulously assembled over the course of years. Michael Smith did not act on impulse. He built a structured operation between 2017 and 2024, using artificial intelligence tools to generate musical compositions on an industrial scale, with no real human creative involvement behind them. They were generic tracks, often with no artistic identity, automatically created and uploaded to the world’s major streaming platforms, including Spotify, Amazon Music, Apple Music, and YouTube Music.
Once the songs were on the platforms, the second phase of the plan kicked in: the bots. These automated programs were configured to simulate billions of streams of those tracks, making it appear as though a massive audience was consuming the content. Streaming platforms pay royalties based on the number of plays, and that is exactly where the money started flowing illegitimately.
According to the indictment, Smith racked up as many as 661,440 streams per day, generating annual royalties in the range of $1,027,128. With every fake stream that was counted, a fraction of the funds that should have gone to real artists was redirected into his pockets.
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What makes all of this even more disturbing is the sheer scale of the operation. We are talking about thousands of AI-generated songs and billions of simulated streams, representing an operation with a level of technical sophistication that goes well beyond a simple amateur scam. It reveals calculated planning, where every detail was designed to dodge the platforms’ detection systems for as long as possible. 😮
What Authorities Had to Say About the Case
United States Attorney Jay Clayton did not mince words when commenting on the conviction. In an official statement from the Department of Justice, he said that Michael Smith generated thousands of fake songs using artificial intelligence and then streamed those tracks billions of times. Clayton emphasized that while the songs and the listeners were fake, the millions of dollars stolen were very real — royalties diverted from legitimate artists and rights holders who deserved that payment.
Then-U.S. Attorney Damian Williams, who was leading the case when Smith was formally charged in September 2024, also spoke at the time, stating that the defendant had stolen millions in royalties that should have been paid to musicians, songwriters, and other rights holders whose songs were legitimately streamed. Williams even threw in a pun, saying it was time for Smith to face the music.
The case quickly gained traction on social media. A commenter on X, going by the name Tuki, summed up the situation pretty bluntly, observing that Smith had used AI to create both the music and the audience, pocketing roughly $1.2 million a year for content that no human being ever actually listened to. Tuki also pointed out that the music industry now has to fight against songs that don’t exist being listened to by people who also don’t exist.
The Direct Impact on Musicians and Royalties
When we talk about diverted royalties, it might sound like an abstract or corporate problem, but the real impact falls on actual people: independent artists, emerging songwriters, and musicians who depend on every penny generated by streaming to pay their monthly bills. The royalty distribution system on these platforms works like a pie of a fixed size. The more fake streams that enter the system, the smaller the slice left for those who actually created something. That means Smith’s fraud didn’t just hurt the platforms — it directly affected every artist registered on them.
To put this in perspective, think about how many independent artists manage to survive on streaming income. Most receive fractions of a penny per stream, which means hundreds of thousands of plays are needed to generate even a minimally relevant income. The platforms’ payment model has long been the target of criticism from musicians, who have complained for years that the system results in subsistence-level earnings, truly benefiting only a handful of major stars. Every dollar stolen through this scheme was, in practice, taken directly from the legitimate work of people who spent hours, days, and years creating their art.
This scenario raises a very serious question about the sustainability of the current compensation model in the digital music industry. If a single person managed to siphon off this much money using AI and bots, how many smaller schemes might be operating right now, flying under the radar of monitoring systems? The honest answer is that nobody knows for sure, and that is far too concerning to ignore. 🎶
A Problem That Goes Far Beyond a Single Case
The Michael Smith case is emblematic, but it barely scratches the surface of a structural problem threatening the entire music industry. The era of digital piracy, symbolized by Napster in the early 2000s, seemed to be behind us after streaming platforms found a functional business model. But now a new AI-based threat has emerged, once again challenging the balance of that ecosystem.
The numbers are staggering. French streaming service Deezer revealed that up to 70% of streams from AI-generated music on its platform are fraudulent. The company also noted that roughly 60,000 fully AI-generated tracks are delivered to the service every single day. And perhaps the most unsettling data point: according to Deezer, 97% of people cannot tell the difference between a song made by humans and one created by AI.
Meanwhile, Suno, one of the most well-known companies in the AI music generation space with around 2 million subscribers, produces approximately 7 million songs per day. According to Billboard, that volume is equivalent to an entire streaming platform’s catalog being recreated every two weeks. A large portion of this output is reasonably similar to existing human compositions, but, as is the case with most mass-produced AI content, it lacks artistic risk and creative depth.
Suno’s own CEO, Mikey Shulman — and it is worth noting a correction here, since the original article mentioned Paul Sinclair, which is actually the name attributed by the cited source — told Billboard that he feels conflicted every day. He acknowledged the complexity of the situation and said he wants to ensure that future generations can enjoy the beauty of art and music, as well as the possibility of building careers around it.
Artificial Intelligence as a Double-Edged Sword
This case highlights something that has been discussed behind the scenes in the creative industry for a while now: artificial intelligence is a powerful technology that can be used both to democratize artistic creation and to distort entire markets when applied with bad intent. AI music generation tools have evolved significantly in recent years and can now produce tracks that sound at least minimally coherent in a matter of seconds, without any human musical talent involved in the process. That alone is already a complex topic when we think about authorship and artistic value.
But when that capability is combined with automated systems for artificial playback, the result is exactly what we saw in this case: a complete distortion of the streaming and royalties ecosystem. These platforms were built on the premise that streams represent genuine interest from human listeners, and the entire business model — from label contracts to payouts for independent artists — was designed based on that premise. When billions of fake streams enter the system, it starts to break down in every possible way.
The good news is that cases like this, when they reach the courts and gain visibility, serve as wake-up calls for platforms to invest more heavily in fraud detection tools. Spotify, for example, had already been removing hundreds of thousands of AI-generated songs from its catalog in recent months, precisely due to suspicions of stream manipulation. Regulatory pressure and concrete conviction cases tend to accelerate this process, but the race between defense systems and new forms of exploitation is still far from having a clear winner. 🤖
The Regulatory Battle for Copyright in the Age of AI
Running parallel to the streaming fraud issue, another battlefront is unfolding on the regulatory side. The United Kingdom government recently scrapped plans that would have allowed AI companies to use copyrighted works without prior permission. The proposal had generated a massive wave of opposition from internationally renowned artists, including names like Elton John, Dua Lipa, and Paul McCartney, who publicly spoke out against the measure.
This movement in the UK reflects a global concern. In the European Union, the AI Act already establishes stricter guidelines on the use of artificial intelligence. In the United States, congressional investigations and cases like Michael Smith’s reinforce the need for a more robust legal framework to deal with the challenges AI poses to the creative industry. Legislation, however, has historically lagged behind technology, and finding the balance between fostering innovation and protecting creators is a challenge that will require a great deal of dialogue among all the parties involved.
What Changes Now for the Music Industry
Michael Smith’s conviction is an important milestone, but it is far from solving the structural problem this case exposes. The music industry will need to urgently rethink how royalties are calculated and distributed in an environment where artificial intelligence can generate content on a virtually unlimited scale. Some platforms are already discussing alternative compensation models, such as direct payment based on verified unique listeners rather than total stream count, which would make this type of scheme far less profitable.
For musicians and songwriters, the most important takeaway here is that collective vigilance matters. Artist associations, independent distributors, and even listeners themselves all play a relevant role in reporting suspicious behavior on platforms and pushing for transparency in streaming data. The Smith case was discovered precisely because anomalous patterns caught attention, and the more eyes watching for those signals, the less room there is for fraud of this kind to operate for long periods without being detected.
Another aspect that deserves attention is the responsibility of the streaming platforms themselves. If the system allowed a single person to accumulate over 660,000 daily streams with artificially generated content for seven years without being flagged, something needs to fundamentally change in the verification and control mechanisms. Investments in technologies for detecting artificial content, verifying artist identity, and analyzing behavioral patterns in streaming data are all paths that need to be fast-tracked. 🎵
At the end of the day, what this episode makes clear is that technology, no matter how transformative it may be, needs accountability to work properly. Artificial intelligence is not the villain of this story, but when placed in the wrong hands and without any control barriers, it can cause real damage to real people who depend on a fair system to survive from their creative work. The Michael Smith case will stand as both a warning and a turning point for an industry that needs to adapt quickly to a reality where songs that don’t exist can be listened to by listeners who also don’t exist.
