(NewsNation) — A North Carolina man has been charged with defrauding music streaming services to the tune of $10 million in royalty payments for using artificial intelligence to not only make music but to “listen” to those songs.
Michael Smith, 52, “played upon the integrity of the music industry by a concerted attempt to circumvent the streaming platforms’ policies,” said FBI Acting Assistant Director Christie M. Curtis.
Smith, of Cornelius, N.C., was arrested Wednesday and charged with wire fraud conspiracy, wire fraud, and money laundering. Each count carries a maximum sentence of 20 years in prison, but a judge would determine the actual sentence should Smith be convicted.
Music streaming platforms such as Spotify, Amazon Music and Apple Music pay royalties to composers, musicians and those who hold the rights to songs. The payments are based on how many times the songs are streamed by people around the world.
Federal prosecutors say Smith first used AI bots to continually stream his own songs, which yielded royalties of more than $1.2 million a year. That reflects more than 660,000 streams per day. But the streaming services’ anti-fraud apps discovered the strategy.
Smith then allegedly expanded the scheme on the assumption that a billion fake streams of tens of thousands of songs would be more difficult to detect since each song was being streamed fewer times.
The Justice Department statement says that Smith went on to create hundreds of thousands of songs with randomly created titles and artist names, as well as thousands of bots that were “hard coded” to stream those songs billions of times. He also allegedly used VPNs to disguise the fact that, while it appeared that all the “creating” and “listening” was worldwide, it actually happened at his house.