Michael Smith, 52, of Cornelius, was arrested in North Carolina and is due to appear in Charlotte federal court Thursday on counts of wire fraud, fraud conspiracy and money laundering conspiracy. His case will be handled by Manhattan U.S. District Judge John G. Koeltl.
The government called it the first criminal case involving artificially inflated music streaming.
"Smith fraudulently streamed songs created with artificial intelligence billions of times in order to steal royalties," Manhattan U.S. Attorney Damian Williams said in a statement. "Through his brazen fraud scheme, Smith stole millions in royalties that should have been paid to musicians, songwriters and other rights holders."
Over an eight-year span, Smith deployed AI works purchased from an unnamed co-conspirator that bore seemingly random names to avoid detection, prosecutors said. Titles included "Zygophyceae," "Zygophyllaceae," and "Zygophyllum," and, in another seemingly random sequence, "Callous Humane," "Callous Post," and "Callousness," the government said.
Smith, a musician by trade, purchased AI-generated works to grow his fraudulent scheme, the feds allege.
"Keep in mind what we're doing musically here ... this is not 'music,' it's 'instant music' ;)," a co-conspirator wrote to Smith in 2019, according to the indictment.
He allegedly streamed songs using an army of bot accounts with concealed internet addresses — made to look legitimate via the purchase of thousands of fake email addresses — tricking the likes of Spotify, YouTube, Amazon Music and Apple Music.
Smith paid individuals in the United States and abroad to do "labor-intensive" data entry work maintaining the bot army, the indictment says.
"Make up names and addresses," the defendant allegedly emailed an unnamed co-conspirator in 2017.
He funded the bot accounts via the use of fraudulently obtained debit cards sporting false names, the feds say.
"In order to not raise any issues with the powers that be we need a TON of content with small amounts of streams," Smith wrote in 2018, according to the indictment. "We need to get a TON of songs fast to make this work around the anti fraud policies these guys are all using now."
The allegedly illegal royalties were paid out by the nonprofit the Mechanical Licensing Collective, which is funded by major streaming platforms.
Smith's lawyer declined comment on Wednesday.
Smith is represented by Noell Tin of Tin Fulton Walker & Owen PLLC.
The government is represented by Nicholas Chiuchiolo and Kevin Mead of the U.S. Attorney's Office for the Southern District of New York.
The case is USA v. Smith, case number 1:24-cr-00504, in the U.S. District Court for the Southern District of New York.
--Editing by Robert Rudinger.
Update: This story has been updated with details from the indictment and counsel information.
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