A federal court sentences a North Carolina man for artificial intelligence streaming fraud

A federal judge has sentenced 54-year-old Michael Smith of North Carolina to 18 months in prison for directing an extensive scheme to harvest music royalties through automated accounts. Along with the prison term, Smith must serve two years of supervised release and forfeit roughly $8.1 million gained through the operation.

The sentencing follows Smith's guilty plea in March, which came after an indictment handed down in September 2024. Over a seven-year span from 2017 to 2024, Smith orchestrated a system that pulled royalty payouts from leading digital music services, including Spotify, Apple Music, Amazon Music, and YouTube Music.

The operation began with Smith attempting to inflate stream counts on his own original recordings. Concentrating high volumes of plays on a limited selection of tracks quickly ran into platform security safeguards, prompting him to alter his approach in search of a less conspicuous method.

To evade fraud detection algorithms, Smith partnered with an unnamed music promoter and the chief executive of an artificial intelligence audio company. Together, they amassed hundreds of thousands of computer-generated songs, calculating that generating small numbers of plays across an enormous library would escape notice from streaming platforms.

The mechanics relied on simulated listeners managed through remote computing services. Court filings reveal that by late 2017, Smith maintained 52 separate cloud accounts, directing more than 1,000 automated listeners. To disguise the automated traffic and simulate ordinary consumer behavior, he routed the connections through virtual private networks.

Records from internal emails show the operation could produce over 660,000 song plays in a single day, yielding steady daily payouts at customary fractional-cent royalty rates. In court filings, prosecutors noted that during April 2023, Smith's automated accounts accumulated more than 80 million plays on YouTube Music family plans, substantially higher than the 9.3 million plays logged by catalog artist Taylor Swift on the same tier that month.

Accounts differ slightly on the full financial yield, with federal prosecutors stating the scheme took in over $10 million while Smith boasted in private messages of earning $12 million from billions of automated plays. Regardless of the exact total, the mechanism diverted substantial sums from general distribution channels.

Streaming services commonly distribute royalty funds from a single shared revenue pool based on each artist's share of overall listening time. By fabricating billions of plays, Smith effectively captured royalty payments that would have otherwise been allocated to working musicians.