Sooner or later, it had to happen.
A North Carolina man has been indicted of fraud charges for claiming over $10 million of royalties payments from major streaming services through hundreds of thousands of AI generated songs.
Federal prosecutors allege that Michael Smith, a (supposed) musician was running a complex music streaming manipulation scheme to fraudulently tot up billions of streams via bot accounts.
In an indictment announcement they said: “At a certain point in the charged time period, Smith estimated that he could use the Bot Accounts to generate approximately 661,440 streams per day, yielding annual royalties of $1,207,128.”
“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,” said Damian Williams, US Attorney for the Southern District of New York. “Today, thanks to the work of the FBI and the career prosecutors of this Office, it’s time for Smith to face the music.”
Arf arf. Smith was charged with wire fraud and money laundering and if found guilty could be facing up to 60 years in prison.
Smith’s scheme was certainly an elaborate one. Allegedly, he managed to obtain thousands of email accounts through bulk account vendors signing up to streaming services such as Spotify, Apple and Amazon Music.
He even paid people in the US and abroad to sign up and, to make their payments look more legitimate, used a service that provides debit cards to employees at companies, providing that company with fake names he said were his employees’.
In tandem with the CEO of an unnamed AI music company, he constructed a scheme whereby the CEO would release thousands of AI-generated songs each month in return for 15% of the takings. In Smith’s own estimation, by February of this year the scheme had netted over $12 million in royalties from over 4 billion streams.
However, the music distribution company he used did get a whiff that something fishy was going on. When an unnamed streaming service threatened to take the music down, Smith vociferously denied it, writing “You have slandered me to my distributors claiming I’ve had fraudulent streams... I’m asking you to provide me with the documentation of what you feel was done artificially.”
With AI-generated music becoming harder and harder to spot you wonder whether there may already be other Michael Smiths operating out there. Let us not forget this isn’t a victimless crime – Spotify’s royalties are paid out on a pro-rata model, as proportions of the overall amount of music on the platform, so streaming fraud diverts royalties that should rightly be paid to legitimate artists.
