An artificial intelligence (AI) music scandal in North Carolina was recently foiled, and now a musician is facing fraud charges over his multimillion-dollar royalty scheme.
In a sensational case that shocked the music industry, Michael Smith was accused of masterminding a high-tech fraud scheme that netted him more than $10 million in royalties. Shocking revelation? Smith allegedly used artificial intelligence and thousands of bots to artificially increase the number of streams of the AI-generated songs, making huge profits in the process.
Smith, 52, was charged with three counts of wire fraud, conspiracy to commit wire fraud and conspiracy to commit money laundering. Federal prosecutors said it was the first criminal case of its kind and marked a dark chapter for the music industry.
U.S. Attorney Damian Williams detailed the seriousness of the charges, saying: “Through his brazen fraud scheme, Smith stole millions of dollars in royalties that were owed to Musicians, songwriters and other rights holders for legal streaming of songs.
According to an unsealed indictment, Smith allegedly operated as many as 10,000 automated bot accounts to play artificial intelligence-generated music on multiple platforms, including Spotify and YouTube. The result? Billions of fraudulent flows fly under the radar of detection systems.
The indictment shows that Smith began working with an unnamed artificial intelligence music company in 2018 and received thousands of tracks per month from the company’s CEO. In exchange for a share of streaming revenue, Smith provided metadata such as artist names and song titles, which made the scam harder to track. In a shocking 2019 email revealed in the indictment, executives at the artificial intelligence company wrote to Smith: “Please remember the music we do here… it’s not ‘music,’ but It’s ‘instant music’.
By 2023, Smith was touting his “success,” claiming his AI-powered business had generated more than 4 billion streams and $12 million in royalties since 2019.
Acting FBI Assistant Director Christie M. Curtis commented: “The FBI remains committed to uncovering those who use advanced technology to make illicit profits and infringe on the true artistic talent of others.”
If convicted, Smith could face decades in prison. The case has shone a spotlight on the dangers of artificial intelligence-generated music and the murky ethics surrounding its use. Just this year, artists including Billie Eilish and Elvis Costello signed a letter calling for an end to what they called the “predatory” use of artificial intelligence in the music industry.
Watch the video above for more details on this lucrative scheme.
