A North Carolina man has pleaded guilty to using artificial intelligence and bots to siphon more than $8 million in streaming royalties — a case that exposes how vulnerable current payout systems are to automated fraud.
What happened
- Michael Smith pleaded guilty March 19, 2026, in the Southern District of New York to conspiracy to commit wire fraud, admitting he ran a yearslong scheme that used AI-generated music and automated streaming accounts to collect illicit royalties. He agreed to forfeit the payments and faces up to five years in prison; sentencing is scheduled for July 29.
- U.S. Attorney Jay Clayton summarized the scheme: “Michael Smith generated thousands of fake songs using artificial intelligence and then streamed those fake songs billions of times,” and “used artificial intelligence and automated bots to create the illusion of popularity—and to collect millions in royalties that belonged to real artists.”
How the scheme worked
- Prosecutors say Smith built a massive catalog of tracks — using both his own recordings and AI tools — then created and operated thousands of accounts to play those songs at scale. When first charged in September 2024, authorities estimated he ran software that generated roughly 661,440 streams per day, producing about $1.2 million in annual royalties. Over time, the total fraud exceeded $8 million.
- Rather than concentrate streams on a few tracks, Smith spread plays across a huge number of songs (prosecutors variously described the catalog as “thousands” and “hundreds of thousands” of AI-generated tracks) to evade detection systems that flag irregular activity.
Why it matters now
- The case arrives as consumer AI music tools (Suno, Udio, Google’s Lyria and others) make it easy to generate vocals, lyrics and instrumentation from simple prompts and to assemble large catalogs quickly. That speed and scale can be abused to manipulate play counts on platforms that calculate payouts by stream volume — notably Spotify, Apple Music, Amazon Music and YouTube Music.
- Beyond this individual prosecution, the affair highlights structural risks for the music industry and for any platform that routes payments based on usage statistics. For crypto and Web3 projects experimenting with tokenized royalties or decentralized streaming, it underscores the need for robust anti-fraud and provenance checks before on-chain royalties are distributed.
Background and fallout
- Rolling Stone previously reported that Smith had pursued a legitimate music career, including charting songs and industry collaborators, before investigators linked him to the manipulation. Smith was released on a $500,000 bond after his initial arrest. Attorneys for Smith did not respond to requests for comment to Decrypt.
Bottom line
- Regulators and rights holders are increasingly confronting AI-assisted schemes that exploit the mechanics of streaming payouts. This conviction signals a tougher enforcement posture — and a warning to platforms and creators to shore up verification and detection systems as AI content proliferation accelerates.
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