For the first time, a US court has sent a person to prison for using artificial intelligence to commit fraud on music streaming services. Fifty-four-year-old Michael Smith of Cornelius, North Carolina, will serve 18 months. For years, he had hundreds of thousands of tracks generated and then played them through an army of fake accounts. He earned more than eight million dollars in royalties this way, roughly 190 million Czech koruna.
The sentence was handed down on Tuesday by federal judge John G. Koeltl in Manhattan. New York prosecutors describe the case as the first-ever criminal prosecution of music streaming fraud in which artificial intelligence played the main role.
How the streaming services’ money pot works
To understand what Smith was doing, it is necessary to know how services such as Spotify, Apple Music, Amazon Music, and YouTube Music pay artists. Every time someone plays a song, the songwriter, performer, and possibly other rights holders are entitled to a small payment. But the money does not come from a bottomless well. The services pay it out from a shared pool based on how many plays each track has accumulated.
Every fake play therefore means that real musicians, whose songs were listened to by real people, receive slightly less. Smith understood this mechanism well and built a business around it.
Three steps to eight million
According to prosecutors, the fraud ran from 2017 to 2024 and followed a simple process. Smith first created thousands of fake accounts on music services. To register them, he used fabricated email addresses and payment cards that he had obtained fraudulently. At its peak, he had as many as ten thousand of them operating at once.
In the second step, he ran software that forced these accounts to continuously play tracks belonging to him, day and night. The third step was the most enjoyable: Smith collected royalties for the plays he had generated himself.
There was one problem with the entire scheme. If he had funneled billions of plays into just a few tracks, fraud-detection systems would have noticed him quickly. Smith was a musician himself and had a small catalog of his own music, but it was nowhere near enough for such a large-scale operation. Prosecutors quoted an email in which he wrote that he needed a huge number of songs quickly in order to bypass anti-fraud protections. Elsewhere, he admitted that if a single track accumulated too many plays, the service would take it down.
Artificial intelligence as a hit factory
He found the solution in artificial intelligence. According to the indictment, associates helped him with the tracks, including the head of an unspecified company developing music using AI and a music promoter. Thanks to them, Smith had access to hundreds of thousands of artificially created songs, which he uploaded under fictitious artist names.
The bots then spread the plays across the entire enormous catalog. No individual track looked suspicious, but together they generated billions of plays. According to findings reported by Billboard, Smith started by artificially boosting the listenership of his own music. He only moved to mass-producing tracks using AI later, when he needed to expand the fraud.
A comparison published by prosecutors themselves shows the scale of the operation. In April 2023, Taylor Swift’s complete catalog accumulated only several million plays through YouTube Music family plans. Smith’s fake accounts using the same plans played his tracks approximately 81 million times in the same month.
Warnings came as early as 2019
Suspicions arose relatively early. As far back as March 2019, one music service warned the distribution company Smith was working with that it had detected signs of fraud involving him. Smith contacted the service directly at the time, denied everything, and demanded that it restore his music. He also repeatedly claimed that his tracks had not been created by artificial intelligence.
The MLC, an organization that distributes streaming royalties in the US, played an important role in uncovering the scheme. Smith was arrested and indicted in September 2024. At the time, he faced three serious charges, including money laundering, each carrying a possible sentence of up to 20 years in prison. This March, he ultimately pleaded guilty to a single count of conspiracy to commit fraud, for which the law allows a maximum sentence of five years.
Defense sought probation, prosecution more than four years
Ahead of sentencing, the two sides differed significantly. The federal sentencing guidelines, which judges usually follow, called for 46 to 57 months in his case. Prosecutors sought at least 46 months and described Smith as the architect of an elaborate fraud that diverted money from honest songwriters almost daily for years. The probation office recommended two years.
Smith’s lawyers, by contrast, asked that their client not go to prison at all. They argued that no artist suffered appreciable harm because the losses were spread among millions of creators in negligible amounts. Just four days before sentencing, they sent the judge a letter seeking probation. In it, they also criticized the music organizations that had intervened in the case by sending their own letters to the judge.
Opposing them were voices from the music industry. The Music Fights Fraud Alliance wrote to the court that the sentence would be the first real indication of the consequences of streaming fraud in America. The Nashville Songwriters Association also submitted a letter.
Judge: This is not about AI, but fake plays
Judge Koeltl ultimately chose a path between the two camps. He imposed an 18-month prison sentence, less than half of what prosecutors had requested. After his release, Smith will remain under supervision for another two years and must forfeit more than eight million dollars to the government, exactly the amount both sides agreed represented the loss.
According to reports from the courtroom, the judge emphasized that the victims were artists. At the same time, he made it clear that the government was not punishing the use of artificial intelligence itself. What was criminal was generating fake plays and collecting money for them.
Nevertheless, prosecutors made full use of artificial intelligence in their press release, albeit under a new name. President Donald Trump signed an order last week directing federal agencies to use the term “super intelligence” instead of artificial intelligence. New York prosecutor Jamie McDonald thus stated that Smith had abused superintelligence technology to commit fraud and that, instead of real listeners, he had flooded music services with bots, and instead of creativity, with fake songs.
Smith was not an unknown figure in the music world. In the past, he served as a judge on the BET competition One Shot, which sought new American rap talent. Compared with Europe, his sentence was similar to that of a Danish man whom a court in Aarhus sentenced to 18 months in prison in 2024 for artificially inflated plays of 689 tracks. However, an appeals court increased his sentence to two years last year after finding evidence of an even more extensive fraud.
Sources: musicbusinessworldwide.com, billboard.com and forbes.com
