A North Carolina musician has been charged in a landmark case involving AI-generated music streaming fraud that allegedly earned over $10 million in royalties. This marks the first criminal case concerning artificially inflated music streaming numbers.

The scheme, running from 2017 to 2024, targeted major platforms including Spotify, Amazon Music, Apple Music, and YouTube Music. The defendant, Michael Smith, allegedly partnered with an AI music company in 2018 to create thousands of tracks.

Key aspects of the alleged fraud:

• Created over 1,040 bot accounts across 52 cloud services
• Generated approximately 661,440 streams per day
• Earned estimated daily royalties of $3,307.20
• Used family plans to spread streams across multiple accounts
• Collected both recording and compositional royalties

The fraud operation involved:

• Transferring $1.3 million to a U.S. bank account (2020-2023)
• Using corporate debit cards with fake employee names
• Misleading distributors about streaming abnormalities
• Continuing until the Mechanical Licensing Collective halted payments in 2023

While creating AI music isn't illegal, Smith faces charges of wire fraud and money laundering conspiracy for the alleged bot-powered streaming scheme.

The case highlights growing concerns about streaming fraud in the music industry, with platforms like Spotify implementing stricter policies, including minimum stream requirements and distributor fines for fake plays.

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