Man Detained for AI Music Streaming Fraud:

$10 Million Royalty Scam Uncovered

A man used AI and bots to create fake bands and songs, generating over $10 million in royalties. Learn how this massive AI music streaming fraud unfolded.

A High-Tech Scam Shocks the Music Industry

Authorities have arrested a man for orchestrating one of the most bizarre and high-tech scams in music history. Using artificial intelligence and bot technology, he allegedly created fake bands and songs that were streamed millions of times to fraudulently collect royalties.

The U.S. Department of Justice (DOJ) announced that Michael Smith, 52, of North Carolina, was taken into custody. He now faces serious charges for running a seven-year-long music streaming scam, earning over $10 million in the process.

How the Scam Worked

Smith’s scheme revolved around two core tactics: using AI to generate songs and deploying bots to fake listens. Working alongside two unnamed accomplices, a music promoter and the CEO of an AI music company, Smith built a massive network of fake content.

Together, they allegedly created hundreds of thousands of AI-generated tracks. These were uploaded to major platforms like Spotify, Apple Music, YouTube Music, and Amazon Music. Then, by using bot networks, they artificially inflated the play counts, converting those fake streams into royalty payments.

Fooling the System with AI-Generated Noise

In internal emails released by the DOJ, the scam becomes clearer. Smith and the AI company’s CEO exchanged messages discussing their tactics. One message reads:

“Keep in mind what we’re doing musically here… this is not ‘music,’ it’s ‘instant music’ 😉.”

The AI music files had bizarre names like n_7a2b2d74-1621-4385-895d.mp3. Smith would rename them to more marketable titles such as “Zygotes,” “Zygotic,” and “Zyme Bedewing” before uploading. Similarly, the artist names ranged from ordinary-sounding options like “Calvin Mann” to strange ones like “Calorie Event”, “Calypso Xored”, and “Calms Scorching.”

Bypassing Fraud Detection with Volume

The group’s main strategy was to overwhelm fraud detection systems with sheer volume. In one email from 2018, Smith wrote:

“We need to get a TON of songs fast to make this work around the anti-fraud policies these guys are all using now.”

At the height of the scam, the CEO allegedly provided Smith with thousands of AI-generated tracks weekly. Smith would then automate the streaming process using bots that generated billions of plays, none of which came from real users.

These massive numbers tricked streaming platforms into paying out royalties, assuming the content was popular with actual listeners.

Indictment and Legal Consequences

The DOJ has indicted Michael Smith on three counts of wire fraud and money laundering. If convicted, he faces up to 20 years in prison per charge. Authorities say he made millions from his royalty fraud scheme while real musicians struggled to earn a living from streaming.

In response to the indictment, Smith told The New York Times:

“This is absolutely wrong and crazy! There is absolutely no fraud going on whatsoever! How can I appeal this?”

The Larger Problem: AI Abuse in the Music Industry

This case raises serious questions about the growing use of AI in music production. As tools for automated content creation become more powerful, the risk of fraud and manipulation on digital platforms increases.

Streaming services may need to update their detection algorithms and royalty verification systems to guard against similar abuse in the future. Otherwise, bad actors may continue to exploit loopholes, siphoning money meant for legitimate creators.

Conclusion: A Cautionary Tale for the Future of AI Music

Michael Smith’s alleged fraud is not just a criminal case; it’s a warning. As AI tools become more accessible, the potential for unethical use grows. The music industry must act swiftly to protect artists and platforms from exploitation.

Streaming platforms, investors, and policymakers alike must take proactive steps to detect and prevent AI-powered scams. Otherwise, the line between creativity and corruption will continue to blur.

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