AI news ·
Prosecutors seek at least 46 months in prison for man who used AI and bots to steal streaming royalties
Federal prosecutors seek at least 46 months in prison for a man who used AI-generated songs and bot accounts to steal over $8 million in streaming royalties from Spotify, Apple Music, and others.
Federal prosecutors in Manhattan are recommending at least 46 months in prison for a North Carolina man who ran a six-year scheme using AI-generated songs and bot accounts to steal millions in royalty payments from major streaming platforms.
Michael Smith, 54, pleaded guilty in March to conspiracy to commit wire fraud and agreed to forfeit $8,091,843.64. The fraud, which ran from 2017 to 2023, targeted Spotify, Apple Music, Amazon Music, and YouTube Music. At its peak in April 2023, Smith's operation generated 80.9 million streams from YouTube Music family-plan subscribers alone, compared with 9.3 million streams that month for Taylor Swift. Prosecutors are seeking a sentence at the bottom of the federal guideline range of 46 to 57 months. Smith's lawyers argue for probation, citing the diffuse nature of the losses across multiple streaming services. The conspiracy charge carries a maximum five-year term. Sentencing is set for October 6.
How the scheme worked
Smith created thousands of AI-generated instrumental tracks using tools that let him produce music without human composers or performers. He then set up bot accounts - automated programs mimicking real listeners - to stream those tracks continuously. The streams came from family-plan subscriber accounts on YouTube Music, which allowed him to multiply the volume of fraudulent plays without raising immediate red flags.
Royalties from legitimate artists and rights holders flow into a shared pool that platforms distribute based on total streams. By injecting millions of fake streams, Smith siphoned payments away from that pool. The scheme operated for six years before federal investigators uncovered it.
The scale of the fraud
The 80.9 million streams in a single month highlight the operation's reach. Across the full duration of the scheme, Smith collected over $8 million in royalty payments. The forfeiture amount matches that figure directly. Prosecutors described the fraud as calculated and sustained, pointing to the technical infrastructure required to maintain thousands of bot accounts and AI-generated tracks across multiple platforms simultaneously.
Legal arguments on both sides
Prosecutors say the length and sophistication of the scheme demand incarceration, even at the low end of the guideline range. Smith's defense team counters that the losses were spread across large corporations, making the harm harder to quantify against any single victim. They are pushing for probation. The judge will weigh those arguments at the October hearing.
Why this matters for legal and finance professionals
This case establishes a direct line between AI-generated content and federal wire fraud prosecution. For legal teams advising clients in music, media, or technology, the ruling signals that courts will treat AI-enabled royalty manipulation as criminal fraud, not a civil licensing dispute. Finance professionals in the streaming and entertainment sectors should note the forfeiture amount - $8.09 million - which matches the proceeds exactly and reflects how prosecutors calculate ill-gotten gains from automated streaming schemes. Compliance officers at platforms that distribute royalties based on usage metrics now have a clear precedent for what criminal exploitation looks like in practice.