Feds Score Guilty Plea in First-Ever U.S. Streaming Fraud Case — An $8M Scheme Aided by AI Music

A North Carolina musician has pled guilty to stealing $8 million in royalties with fake streams on AI-generated music in the first-ever criminal streaming fraud case brought by U.S. prosecutors.

Michael Smith, 54, copped to one count of wire fraud conspiracy on Thursday (March 19) in New York federal court. He agreed to forfeit his $8 million in streaming fraud proceeds and faces up to five years in prison.

“Michael Smith generated thousands of fake songs using artificial intelligence and then streamed those fake songs billions of times,” said Manhattan’s top federal prosecutor, U.S. Attorney Jay Clayton, in a statement Thursday. “Although the songs and listeners were fake, the millions of dollars Smith stole was real. Millions of dollars in royalties that Smith diverted from real, deserving artists and rights holders. Smith’s brazen scheme is over, as he stands convicted of a federal crime for his AI-assisted fraud.”

Smith remains free on a $500,000 bond until his sentencing hearing this upcoming July. His lawyer declined to comment on Thursday.

Smith was arrested in 2024 on a three-count indictment that charged him with using thousands of bots to continuously stream his songs on multiple platforms, including Spotify, Amazon Music, Apple Music and YouTube Music, starting in 2017. Prosecutors said Smith originally used his own small catalog of human-made music for the scheme but later turned to AI for content.

In late 2018, Smith allegedly began working with the CEO of an unnamed AI music company to supply songs for his fake streams. The indictment says Smith promised to share the proceeds with this company, in the form of the greater of $2,000 per month or 15% of his monthly revenue.

Though this company is not identified in court papers, Billboard reported in 2024 that hundreds of the songs registered to Smith list Alex Mitchell, the CEO and founder of AI music company Boomy, as a co-writer. At the time, Mitchell told Billboard, “We were shocked by the details in the recently filed indictment of Michael Smith, which we are reviewing. Michael Smith consistently represented himself as legitimate.”

Mitchell has not been charged with any crime. The indictment denoted Smith’s AI music partner as “CC-3,” a shorthand for “co-conspirator” that is oftentimes used to denote an individual who has cooperated with prosecutors in exchange for amnesty. A rep for Boomy did not immediately return a request for comment Thursday.

Smith’s scheme eventually fell apart when his artificial streams were detected in 2023 by streaming platforms and the Mechanical Licensing Collective (MLC), the official organization designated by the U.S. Copyright Office to collect and distribute digital royalties for songwriters.

In a statement released Thursday, the MLC said Smith’s guilty plea “highlights the serious threat that streaming fraud poses to the music industry and the important role The MLC plays in confronting it.”

“We appreciate the Department of Justice’s swift action, recognizing that The MLC identified the fraud early, challenged Smith and his representatives, and prevented the diversion of mechanical royalties away from rightful songwriters,” added the MLC. “The MLC will continue to invest in anomaly detection and fraud prevention to protect our members, and we will continue to collaborate with other industry organizations and law enforcement to protect all songwriter royalties.”

As alluded to in the MLC’s statement, streaming fraud is a problem for artists and songwriters because digital royalties are paid out of a fixed pool — meaning fraudulent streams take funds away from the creators who actually have real listeners.

This issue has only gotten worse with the rise of AI music, which provides an easy tool for bad actors to quickly generate thousands of songs for their fake streams. Platforms like Spotify have responded by enacting strengthened policies aimed at reigning in malicious streams, but the problem persists.