North Carolina Man Charged With AI-Generated Music Fraud, Taking Royalties of $10 Million

In a groundbreaking criminal case involving AI-generated music, a 52-year-old North Carolina man has been charged with stealing royalties by using artificial intelligence to create fake songs and generate fraudulent streams on music platforms such as Amazon Music, Apple Music, Spotify and YouTube Music.

On Sept. 4, US Attorney Damian Williams filed charges against Michael Smith, accusing him of orchestrating a scheme that fraudulently earned him $10 million in royalties from popular streaming platforms.

“As alleged, Michael Smith fraudulently streamed songs created with artificial intelligence billions of times in order to steal royalties,” US Attorney Damian Williams said. “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. Today, thanks to the work of the FBI and the career prosecutors of this Office, it’s time for Smith to face the music.”

Smith allegedly used AI to produce hundreds of thousands of songs, which he published on multiple platforms. He then used automated accounts, or "bots," to artificially inflate the number of streams.

The US Attorney claims that Smith began his fraudulent operation in 2017 by creating thousands of automated accounts programmed to continuously stream the AI-generated songs. He also purchased a large number of email addresses and recruited individuals, some based overseas, to create listener accounts on various platforms.

“From approximately 2017, up to and including 2024, MICHAEL SMITH, the defendant, orchestrated a scheme to steal millions of dollars of musical royalties by fraudulently inflating music streams on digital streaming platforms (the "Streaming Platforms"), such as Amazon Music, Apple Music, Spotify, and YouTube Music,” the indictment reads.

“SMITH purchased from a coconspirator hundreds of thousands of songs that were created through artificial intelligence ("AI") and then uploaded to the Streaming Platforms. SMITH then used "bots"-automated programs-to stream the AI-generated songs billions of times.”

These automated accounts, along with the use of virtual private networks (VPNs) to simulate various geographic locations, allegedly helped the accused manipulate the streaming data, making it appear as though users from across the globe were listening to his tracks.

The indictment also notes that Smith estimated he could generate around 661,440 streams per day, resulting in annual royalties of over $1.2 million. To avoid detection by platform moderators, Smith distributed the streams across a vast catalog of tracks.

To increase his profits, Smith realized he needed more songs. On Dec. 26, 2018, he emailed two co-conspirators stating: “We need a TON of songs fast to make this work around the anti-fraud policies these guys are all using now.”

Smith turned to AI-generated music to expand his catalog. He partnered with the CEO of an AI music company and a music promoter to produce hundreds of thousands of AI-generated tracks. These tracks were then fraudulently streamed using Smith's bot accounts.

The criminal filing indicates that the CEO was aware of the fraudulent scheme's intent and regularly supplied Smith with batches of AI-generated songs, typically titled with random letters and numbers. Smith then assigned random names to these tracks, making them appear as though they were created by real artists rather than AI.

Prosecutors highlighted the use of similar, barely distinguishable song and artist names to mask the true nature of the operation.

Smith was arrested on Sept. 4 and is set to appear before a US Magistrate Judge in North Carolina. He faces charges of wire fraud conspiracy, wire fraud, and conspiracy to commit money laundering. Each charge carries a potential sentence of up to 20 years in prison.

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