It is a feat most Grammy winners never achieve: billions of streams across the world’s largest platforms. But for Michael Smith, a 54-year-old North Carolina resident, 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-ever 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 illicit gains, as per the U.S. Attorney’s Office for the Southern District of New York.
The man behind the tunes
Before becoming a federal convict, Smith lived the quintessential suburban life in a sprawling house in Charlotte with his wife and six kids. He had made consistent money by owning a string of medical clinics, judged a reality show ‘One Shot’ and even written a self-help book. The next on his life’s agenda was to get famous and he began the venture. In 2013, he booked “20 hours” of musical training session with Jonathan Hay, a publicist offering PR consulting to aspiring musicians. However, beneath the surface of his burgeoning music career lay a massive digital architecture designed to siphon money from the industry’s royalty pools.
Anatomy of a $8 million heist
The scheme was a perfect marriage of high-tech automation and “instant music.” According to his friend and musical godfather Hay, Smith linked up with Alex Mitchell, CEO of an AI song generator startup Boomy. It allowed people to “create” music by selecting or customising prompts about the tunes. Around 2018, a “Chief Executive Officer of an AI music company” provided Smith with “thousands of songs each week.” The songs had names like “Zygophyceae,” and “Zygopteraceae” with credit to fake artists, “Calm Force” and “Calorie Event.” But he didn’t wait for listeners to discover his beats or promote them online, he built a private audience.On October 20, 2017, Smith emailed himself a financial breakdown showing he had 52 cloud service accounts, each with 20 bot accounts on streaming platforms, for a total of 1,040 bot accounts, according to the indictment. At its peak, Smith generated about 661,440 streams per day, resulting in annual royalties to himself exceeding $1.2 million.In 2018, Hay and Smith released an album called ‘Jazz’ which shot up the Billboard chart and hit No. 1. right away. But the next week, it disappeared from the ranking. Hay began receiving notices from distributors flagging their music for streaming fraud and pulling it down. This was just the beginning of the revelation of the gamble.Meanwhile, he was also navigating a lawsuit from staffers at his medical offices, who claimed his clinics engaged in Medicaid and Medicare fraud and alleged that he was moving money from the clinics into his record label with Hay, SMH Records. The case settled with Smith and his co-defendants reaching a settlement in 2020, requiring them to pay $900,000. However, by 2022, Smith was back on track, even producing a song featuring Snoop Dogg and Billy Ray Cyrus. He also had other projects lined up including a horror movie with RZA and an animated series in which a cartoon Smith would travel to the afterlife. Sadly by the next year, all the fanfare fell silent. The movie slammed, and Smith dipped off social media. The “spigot” finally turned off in 2023 when the Mechanical Licensing Collective, a non-profit entity that collects and dispenses royalties for streaming services, had confronted Smith about his fraud and was now halting payments. By September 2024, the FBI arrived on his doorstep alleging that he had used artificial intelligence music generators to create a massive amount of songs. “Smith’s brazen scheme is over, as he stands convicted of a federal crime for his AI-assisted fraud,” said U.S. Attorney Jay Clayton in a statement on Thursday. He now faces a maximum of five years in prison and is scheduled to be sentenced by July 29.
Video killed the Radio Star?
Users stream music through platforms such as Amazon Music, Apple Music, Spotify, YouTube Music and more. Each time a song is played through these platforms, the songwriter, singer and other people with rights are entitled to small royalty payments. However, due to streaming frauds, these funds are diverted from talented artists to fraudsters. Streaming fraud has developed into a rampant issue in the music industry over the past couple of years with the rise in use and technology of AI. Fraudsters have made use of codes and websites to generate thousands of songs and flood popular streaming services including Spotify and Apple Music. Previously, Deezer, a French music streaming service reported that it has seen 60,000 AI songs uploaded to its platform daily, further noting that about 85% of streams on those tracks were fraudulent. Morgan Hayduk, co-CEO of Beatdapp, a streaming-fraud detection startup shared with WIRED that he had monitored whole networks of actors siphoning money from streamers. “Conservatively, it’s a billion-dollar-a-year type of problem,” Hayduk said. “The Michael Smith case is the tip of the iceberg.”A 2021 study by France’s National Music Center found that around 1 to 3 per cent of all streams were fraudulent. As per Bestdapp, the number is around 10 per cent. Smith isn’t the first person to execute a streaming fraud. Whether he is viewed as a high-tech thief or a “Robin Hood” who gamed an exploitative system, one thing is certain: the era of the “audienceless superstar” has met its first legal reckoning.
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