Suspect Pleads Guilty in First-Ever United States Criminal Prosecution for Streaming Fraud

Michael Smith, of Cornelius, North Carolina, has pleaded guilty to one count of conspiracy to commit wire fraud for running a streaming scheme using bots and AI-generated songs. According to the charge, Smith fraudulently earned $8 million dollars in royalties.

The scheme:

• Smith created thousands of fake accounts across several streaming services, including Amazon Music, Apple Music, Spotify, and YouTube Music.

• He then developed software to have those accounts constantly stream songs he owned, delivering royalty payments.

• Smith created hundreds of thousands of songs with AI, so the platform's anti-fraud detection didn’t pick up on the activity.

• Smith said the scheme generated around 661,440 streams per day, resulting in over $1.2 million per year in royalties.

The case:

• Smith faces up to five years in prison.

• He will also pay $8 million as part of the guilty plea.

• He is scheduled to be sentenced on July 29, 2026, by U.S. District Judge John G. Koeltl in the Southern District of New York.

• The Mechanical Licensing Collective (The MLC), a primary distributor of mechanical royalties from US streaming, helped identify the fraudulent activity.

• Unnamed co-conspirators in the case are the CEO of an AI music company and a music promoter.

• Smith was initially arrested and indicted in September 2024.

• It was the first criminal case in the US related to fraudulent music streaming at the time.

• The original charges were wire fraud, wire fraud conspiracy, and money laundering conspiracy.

• All three carried a maximum sentence of 20 years.

• Smith pleaded not guilty to those charges.

What they said:

• The MLC: “Today’s news highlights the serious threat that streaming fraud poses to the music industry and the important role The MLC plays in confronting it. We appreciate the Department of Justice’s swift action, recognizing that The MLC identified the fraud early, challenged Smith and his representatives, and prevented the diversion of mechanical royalties away from rightful songwriters. The MLC will continue to invest in anomaly detection and fraud prevention to protect our Members, and we will continue to collaborate with other industry organizations and law enforcement to protect all songwriter royalties.”