Michael Smith, a 52-year-old North Carolina resident, has been arrested by the Department of Justice (DOJ) for running a sophisticated seven-year fraud involving AI-generated music and fictitious bands.
Smith allegedly created hundreds of thousands of counterfeit songs, manipulated streaming services for fake plays, and illegally amassed over $10 million in royalties. He now faces wire fraud and money laundering charges, each carrying a potential maximum sentence of 20 years.
The DOJ reports that Smith, alongside two accomplices—a music promoter and an AI music company CEO—used artificial intelligence to generate tracks distributed on platforms like Spotify, Apple Music, Amazon Music, and YouTube Music.
Smith allegedly used bots to artificially inflate stream counts, transforming these into substantial royalty payments while managing to evade the anti-fraud systems of various streaming platforms for several years.
Investigative findings include emails detailing the scheme. In a 2018 email, Smith encouraged his co-conspirators to produce many tracks to outmanoeuvre platform anti-fraud upgrades.
The CEO of the AI company provided thousands of songs under randomized file names like “n_7a2b2d74-1621-4385-895d-b1e4af78d860.mp3,” which Smith then renamed with more appealing titles such as “Zygotes” and “Zyme Bedewing.” To lend credibility, they created fake artists with names like “Calvin Mann,” “Calorie Event,” and “Calypso Xored.”
This fraudulent operation focused on generating low-quality, AI-created “instant music” to exploit streaming platforms’ royalty systems. Bots streamed the tracks billions of times, leading to illegal earnings for Smith and his associates.
Despite the DOJ presenting significant evidence, including incriminating emails and fraudulent streaming data, Smith has denied all allegations. He expressed his shock and frustration to the New York Times, strongly denying any fraudulent activities and questioning the grounds of the charges against him.
