It’s a feat most GRAMMY winners never achieve: billions of streams on the world’s biggest platforms. But for North Carolina resident Michael Smith, 54, the “fans” didn’t exist. They were lines of code, and the music was “AI Slop”.Smith has officially pleaded guilty to conspiracy to commit wire fraud, marking the first criminal conviction for AI-assisted music streaming fraud in US history. As part of his plea, Smith has agreed to forfeit $8.1 million in ill-gotten gains, according to the U.S. Attorney’s Office for the Southern District of New York.
the man behind the tunes
Before becoming a federal criminal, Smith lived the quintessential suburban life in a spacious home in Charlotte with his wife and six children. He made money steadily by owning several medical clinics, judging a reality show ‘One Shot’ and even wrote a self-help book. His next agenda in life was to become famous and he started the venture. In 2013, he booked a “20-hour” music training session with Jonathan Hay, a publicist who provides PR consulting to aspiring musicians. However, beneath the surface of his burgeoning music career was a vast digital architecture designed to siphon money from the industry’s royalty pools.
Anatomy of an $8 Million Heist
The scheme was a perfect combination of high-tech automation and “instant music”. According to his friend and music godfather Hey, Smith hooked up with Alex Mitchell, CEO of AI song generator startup Boomi. It allowed people to “make” music by choosing or customizing cues about the tune. Around 2018, the “chief executive of an AI music company” provided Smith with “thousands of songs each week”. The songs were named “Zygophyceae” and “Zygopteraceae”, crediting the fake artists, “Calm Force” and “Calorie Event”. But he didn’t wait for listeners to discover his tunes or promote them online, he built a personal audience.According to the indictment, on October 20, 2017, Smith emailed himself a financial statement showing he had 52 cloud service accounts, each containing 20 bot accounts on the streaming platform, for a total of 1,040 bot accounts. At his peak, Smith generated approximately 661,440 streams per day, resulting in his annual royalties exceeding $1.2 million.In 2018, Hay and Smith released an album titled ‘Jazz’, which hit the Billboard charts and immediately reached No. 1. But the next week it disappeared from the rankings. Hay began receiving notices from distributors that his music be flagged for streaming fraud and removed. This was the beginning of the revelation of gambling.Meanwhile, he was also investigating a lawsuit from employees of his medical offices who claimed that his clinics engaged in Medicaid and Medicare fraud and alleged that he was transferring money from the clinics to his record label with Hey, SMH Records. The case was settled in 2020 with Smith and his co-defendants reaching a settlement that would have required them to pay $900,000. However, by 2022, Smith was back on track, even producing a song with Snoop Dogg and Billy Ray Cyrus. He also had other projects in the works including a horror film with RZA and an animated series in which a cartoon Smith would travel to the afterlife. Sadly, all the fanfare died down by the following year. The film flopped and Smith stepped away from social media. “Spigot” was eventually shut down in 2023 when the Mechanical Licensing Collective, a non-profit that collects and distributes royalties to streaming services, had informed Smith of his fraud and was now withholding payments. By September 2024, the FBI arrived at his door and alleged that he had used artificial intelligence music generators to create massive amounts of songs. “Smith’s brazen scheme is over, as he has been convicted of a federal crime for committing AI-assisted fraud,” the US said. attorney Jay Clayton said in a statement Thursday. He now faces a maximum of five years in prison and is scheduled to be sentenced on July 29.
video Killed the Radio Star?
Users stream music through Amazon Music, Apple Music, Spotify, YouTube Music, and other platforms. Every time a song is played through these platforms, songwriters, singers and others who own the rights are entitled to small royalty payments. However, due to streaming fraud, these funds shift from talented artists to fraudsters. Streaming fraud has become a massive problem in the music industry over the past few years with the increase in the use of AI and technology. Fraudsters have used codes and websites to create thousands of songs and flood popular streaming services including Spotify and Apple Music. Earlier, Deezer, a French music streaming service, reported that it uploaded 60,000 AI songs to its platform daily, further adding that about 85% of the streams on those tracks were fraudulent. Morgan Hayduk, co-CEO of streaming-fraud detection startup BeatDap, shared with WIRED that they had monitored an entire network of actors extorting money from streamers. “Conservatively, this is a billion-dollar-a-year problem,” Hayduk said. “The Michael Smith case is the tip of the iceberg.”A 2021 study by France’s National Music Center found that about 1 to 3 percent of all streams were fraudulent. According to Bestdap, this number is around 10 percent. Smith is not the first person to commit streaming fraud. Whether he is seen as a high-tech thief or a “Robin Hood” who circumvents an exploitative system, one thing is certain: the era of the “audience-less superstar” has got its first legal reckoning.
