First US case of AI-driven music streaming royalty fraud ends in guilty plea

CORNELIUS, N.C. — A Cornelius man pleaded guilty Thursday to running a music streaming fraud scheme that used artificial intelligence and bot accounts to steal more than $8 million in royalties.

Federal authorities said the case involving 54-year-old Michael Smith is the first of its kind in the United States.

Smith used automated programs to manipulate platforms including Amazon Music, Apple Music, Spotify and YouTube Music between 2017 and 2024. By generating billions of fraudulent streams for AI-created songs, he diverted royalty payments intended for legitimate musicians and songwriters into his own accounts.

Smith pleaded guilty to one count of conspiracy to commit wire fraud in the Southern District of New York. He faces a maximum sentence of five years in prison for the charge. As part of his plea agreement, Smith agreed to the forfeiture of more than $8 million in stolen funds.

The scheme relied on thousands of automated “bot” accounts to mimic human listeners. According to a September 2024 indictment, Smith emailed himself a financial breakdown in October 2017 showing he operated 52 cloud service accounts. Each of those accounts held 20 bot profiles, creating an initial network of 1,040 automated listeners that grew over the following years.

To provide content for these bots to stream, Smith used artificial intelligence to generate hundreds of thousands of songs. This allowed him to create a massive library of music without employing traditional artists. At the height of the operation, Smith generated approximately 661,440 streams per day, resulting in annual royalties exceeding $1.2 million.

Federal prosecutors said Smith intentionally spread the manipulated streams across a vast number of tracks to avoid being flagged by the streaming platforms’ fraud detection systems. They said Smith knew that concentrating billions of streams on a single song would be detected, so he distributed the activity across thousands of different AI-generated tracks.

Smith is scheduled to be sentenced on July 29, 2026.

WATCH: Vape stores raided in Chesterfield County