Musician confesses to massive streaming royalty scam

North Carolina Musician Pleads Guilty in $10 Million Streaming Royalty Fraud Scheme

A North Carolina musician named Michael Smith has recently admitted to participating in a massive streaming royalty fraud scheme, which involved collecting over $10 million in royalty payments from popular platforms such as Spotify, Apple Music, Amazon Music, and YouTube Music.

Smith, who is 54 years old, confessed to purchasing hundreds of thousands of songs that were created using artificial intelligence (AI) from a collaborator. He then proceeded to upload these AI-generated tracks onto various streaming platforms and utilized automated AI bots to artificially inflate the number of streams to billions.

According to legal documents that were disclosed when Smith was initially charged in September 2024, he collaborated with an unnamed music promoter and the CEO of an AI music company to manipulate the streaming statistics of his songs between 2017 and 2024. To evade detection by anti-fraud systems, Smith had the bots access the streaming platforms through virtual private networks (VPNs).

In one email dated October 4, 2018, Smith communicated with his partners, stating the need for a large volume of content with minimal streams to bypass the anti-fraud policies enforced by the platforms. He emphasized the urgency of acquiring a substantial number of songs quickly to circumvent the stringent regulations in place.

At the peak of his operation, Smith operated more than 1,000 bot accounts to artificially boost the number of streams. In another email from October 20, 2017, he outlined a financial breakdown detailing how he managed 52 cloud service accounts, each equipped with 20 bot accounts.

Smith estimated that each bot could generate approximately 636 streams per day, translating to a total of around 661,440 streams daily. With an average royalty rate of half a cent per stream, he calculated that his daily earnings could amount to $3,307.20, with monthly earnings reaching $99,216 and annual earnings surpassing $1.2 million.

U.S. Attorney Jay Clayton condemned Smith’s actions, highlighting the magnitude of the scheme and the substantial losses incurred by legitimate artists and rights holders. Smith’s fraudulent activities not only deceived the system but also diverted millions of dollars in royalties from deserving individuals.

Prosecutors revealed that Smith fraudulently acquired over $10 million in royalty payments by employing his bots to stream hundreds of thousands of AI-generated songs billions of times. In a February 2024 correspondence, Smith boasted about the success of his scheme, claiming that the songs he generated had accumulated “over 4 billion streams and $12 million in royalties since 2019.”

As part of his plea agreement, Smith has agreed to forfeit $8,091,843.64 and could face a maximum prison sentence of five years for his involvement in a conspiracy to commit wire fraud.