A North Carolina man, Michael Smith, has been arrested for allegedly orchestrating a massive music streaming fraud scheme using artificial intelligence, which earned him over $10 million in royalties.

Federal authorities in New York announced on Wednesday that Michael Smith, from Cornelius, North Carolina, faces multiple fraud and conspiracy charges that could lead to a maximum sentence of 60 years in prison.

The scheme, which ran from 2017 to 2024, involved him using AI to generate hundreds of thousands of songs, which were then streamed billions of times to collect royalty payments.

According to the US Attorney Damian Williams, his actions deprived legitimate musicians and songwriters of royalties that should have gone to them.

Michael Smith’s fraudulent activities cheated them out of millions, and it’s now time for him to “face the music,” Damian Williams added.

The indictment, filed in New York, accuses him of wire fraud conspiracy and money laundering conspiracy.

Each charge carries a potential 20-year prison sentence.

Christie M. Curtis, head of the FBI’s New York office, emphasised that Smith had exploited automated technology to stream AI-generated music continuously, generating unlawful royalty payments.

She added that the FBI is committed to stopping those who misuse advanced technology for personal gain at the expense of others’ genuine talent.

How the Scheme Worked

Michael Smith reportedly created thousands of fake accounts, or “bot accounts,” on major streaming platforms such as Amazon Music, Apple Music, Spotify, and YouTube Music.

He used these accounts to stream his AI-generated songs non-stop, with court documents revealing that his system could generate up to 661,000 streams per day.

This resulted in about $1.2 million in annual royalties, all drawn from royalty pools set aside by streaming platforms for artists whose music is streamed.

To avoid detection by the platforms and music distributors, Michael Smith spread his fraudulent streams across tens of thousands of songs, ensuring no single song attracted undue attention.

In 2018, when a music distribution company suggested that he might be committing fraud, he denied the allegations, calling them “absolutely wrong and crazy.”

Turning to AI for more songs

As Michael Smith’s fraudulent scheme progressed, he realised he needed more songs to continue flying under the radar.

In December 2018, he emailed two co-conspirators, stating they needed to produce more songs quickly to bypass the anti-fraud measures used by streaming platforms.

He began collaborating with the CEO of an AI music company and a music promoter, both of whom provided him with hundreds of thousands of AI-generated songs.

Each week, the promoter would supply him with thousands of songs, which he would upload to streaming platforms under randomly generated artist names like “Calliope Bloom” and “Calm Force.”

The AI-generated tracks lacked artistic value and were created specifically for the purpose of fraudulent streaming, as noted in a 2019 email where the promoter referred to their work as “instant music.”

He also used fake names and false information to set up accounts on streaming platforms and agreed to abide by terms that prohibited streaming manipulation.

Despite these agreements, he used his bot accounts to ensure his AI-generated songs were streamed billions of times, allowing him to fraudulently claim royalties meant for real artists.

By February 2023, he boasted in an email that his scheme had generated over four billion streams and earned him $12 million in royalties since 2019.

However, his actions caught the attention of federal authorities, leading to his arrest on Wednesday. His lawyer has not yet responded to requests for comment.

Smith will now face trial in federal court for his role in one of the largest AI-aided music streaming frauds ever uncovered.