Musician admits to $10 M streaming royalty fraud using AI bots

AI STREAMING SCAM: NORTH CAROLINA MUSICIAN PLEADS GUILTY TO OVER $10 MILLION IN ROYALTY FRAUD

A North Carolina musician has admitted to orchestrating a sweeping streaming royalty fraud that cheated major platforms out of more than ten million dollars. The scheme involved uploading tens of thousands of AI-generated songs and then deploying thousands of automated bots to repeatedly stream those tracks on services such as Spotify, Apple Music, Amazon Music, and YouTube Music. The operation ran for several years, spanning from 2017 through 2024, and relied on the involvement of an unnamed music promoter and the CEO of an AI music company to inflate listening data and bypass standard anti-fraud defenses.

The mechanics of the fraud were simple in description but extraordinary in scale. The defendant, Michael Smith, purchased large volumes of AI-generated music from an accomplice, uploaded them to popular streaming platforms, and then used a network of bots to generate billions of simulated plays. To avoid detection by the platforms’ fraud-detection systems, the bots operated through virtual private networks, masking the activity as legitimate user streams. In internal emails and communications, Smith’s group discussed the need for a torrent of content with modest individual streams to evade the red flags that catch flagrant fraud schemes.

At the peak of the operation, the conspirators reportedly controlled more than a thousand bot accounts active at once. They also used about fifty-two cloud service accounts, each housing around twenty bot accounts, creating a sprawling web of automated activity designed to resemble real consumer listening. The team estimated that each bot could generate roughly 636 streams per day, resulting in more than six hundred thousand streams daily across the whole operation—about 661,440 streams every day in total. The calculations funded the profits they sought: with an average royalty rate around half a cent per stream, daily revenues could exceed three thousand dollars, with monthly earnings approaching one hundred thousand dollars and annual income surpassing one million dollars.

Authorities characterized the scheme as a deliberate theft from legitimate artists and rightsholders. Although the streams and the listeners in this scenario were artificial, the financial damage was real, siphoning royalties away from those who created the music. U.S. Attorney statements underscored the brazen nature of the operation and its disregard for the integrity of the streaming ecosystem.

Court records indicate that fraudulent payments totaled over ten million dollars in royalties obtained through the conspiracy. A February 2024 email within the investigation highlighted claims of enormous streaming counts and royalties, including assertions of billions of streams linked to the AI-generated catalog since 2019. These communications helped prosecutors build the case that the scheme was not a one-off incident but a sustained effort over multiple years.

As part of the resolution, Smith has agreed to forfeit more than eight million dollars—specifically eight million ninety-one thousand eight hundred forty-three dollars and sixty-four cents. He pled guilty to one count of conspiracy to commit wire fraud, a charge tied directly to the fraudulent monetization of AI-generated content and automated streaming activity. If convicted at sentencing, he faces a maximum penalty of five years in prison.

Reaction to the case emphasizes the harm to the broader music community. Officials emphasized that the millions of dollars diverted from real artists and rights holders is a tangible cost to the integrity of the streaming economy. The guilty plea signals a broader commitment to pursuing cases where artificial intelligence tools are used to deceive consumers and monetize fraudulently, rather than to enhance legitimate artistic creation.

This case spotlights a growing area of concern for regulators and platforms alike: the use of automation and AI-generated material to manipulate streaming metrics. As streaming continues to be a primary distribution channel for music, the boundary between legitimate optimization and illicit manipulation becomes ever more critical. The ongoing investigations and ensuing legal process aim to deter similar schemes in the future, ensuring that royalty distributions more accurately reflect genuine listening activity and respect the work of real musicians and rights holders.