US Man Pleads Guilty to $8M AI-Driven Streaming Fraud

A 54-year-old North Carolina man has pleaded guilty to orchestrating a large-scale streaming fraud scheme powered by AI, in what US authorities say is one of the most significant cases of its kind to date.

Michael Smith entered a guilty plea to conspiracy to commit wire fraud in a New York federal court this week, after admitting to generating vast volumes of AI-created music and using bot networks to inflate streaming numbers, per Rolling Stone. According to prosecutors, Smith uploaded hundreds of thousands of AI-generated tracks to major DSPs and deployed automated accounts to stream the songs billions of times, creating the illusion of legitimate listener activity.

The scheme ultimately diverted more than US$8 million in royalty payments, funds that would otherwise have been distributed to artists and rights holders based on genuine consumption. US Attorney Jay Clayton said the case highlights how emerging technologies are being weaponised to exploit the streaming economy. In a statement, he noted that while “the songs and listeners were fake", the financial impact on the industry was very real.

"Smith’s brazen scheme is over, as he stands convicted of a federal crime for his AI-assisted fraud," Clayton said.

The charge carries a maximum sentence of five years in prison. Smith agreed to pay $8,091,843.64 in forfeiture. A letter from the Department of Justice indicated that in addition to forfeiting his earnings and the maximum prison sentence, he could also be sentenced to three years’ supervised release and a maximum fine of $250,000. Sentencing is scheduled for July 29th. The DOJ said it would not prosecute Smith further but that it would consider tax violations between 2017 and 2024 should it discover them.

A Rolling Stone investigation into Smith revealed he was using 1,040 accounts, which would each stream around 636 of his AI-generated songs a day. That added up to 661,440 streams a day, potentially earning him $3,307.20 a day, $99,216 a month, and over $1.2 million a year.

“Smith stole millions in royalties that should have been paid to musicians, songwriters, and other rights holders whose songs were legitimately streamed,” U.S. Attorney Damian Williams commented when Smith was indicted.