North Carolina Man Pleads Guilty to Streaming Fraud
A man from North Carolina has admitted to defrauding streaming services out of more than $8 million using songs generated by AI and automated bots. He has agreed to repay the amount while he awaits sentencing.
Mike Smith, 54, pleaded guilty in front of U.S. District Judge John G. Koeltl on a charge of conspiracy to commit wire fraud. His sentencing is set for July.
There’s a potential maximum sentence of five years for this crime. Additionally, Smith has agreed to surrender $8,091,843.64, an eye-watering figure.
During a court appearance, Smith confessed that he created hundreds of thousands of AI-generated songs. He went further by deploying thousands of bots that mimicked actual listeners to stream these songs billions of times to generate revenue.
He successfully avoided detection by distributing streams to numerous fake accounts across various platforms, including Amazon Music, Apple Music, Spotify, and YouTube Music. This elaborate scheme resulted in him accruing over $8 million.
“The songs and listeners were fake, but the millions of dollars Smith stole were real,” noted Jay Clayton, the U.S. attorney for the Southern District of New York. “Mr. Smith’s brazen scheme is over. He has been convicted of a federal crime for fraud using AI.”
Clayton added that the funds Smith acquired were “diverted from genuine and deserving artists and rights holders.”
At one point in his career, Smith, who struggled for years in the music industry, participated as a producer and judge on music shows. However, he ultimately opted to pursue this AI scam, details of which emerged in an investigation earlier this year.
According to reports, he managed 1,040 accounts, with each account streaming roughly 636 songs daily. This led to an impressive average of 661,440 streams per day, allowing him to estimate earnings of about $3,307.20 daily, or more than $1.2 million annually.
The Department of Justice has suggested that Smith should face three years of supervised release, alongside a fine of up to $250,000, in addition to any other penalties he might incur.
