Prosecutors Seek 46 Months for AI Music Streaming Fraudster

Manhattan federal prosecutors are demanding at least 46 months in prison for Michael Smith, the North Carolina man who admitted using artificial intelligence to generate thousands of fake songs and bot accounts to stream them billions of times, siphoning more than $8 million from royalty pools meant for legitimate artists.

In a letter filed Tuesday and obtained by Rolling Stone, prosecutors from the U.S. Attorney's Office for the Southern District of New York urged a judge to impose what they called a "significant punishment" at Smith's sentencing, set for Oct. 6 in Manhattan federal court. The recommendations diverge sharply: Smith's defense is asking for probation with no jail time, while federal probation officials recommend 24 months in prison.

The scale of the scheme startled even seasoned prosecutors. According to their letter, Smith became so adept at artificially inflating streams on Apple Music, Spotify, Amazon Music and YouTube Music that his share of subscription-funded royalty pools at times exceeded the shares allotted to the industry's biggest stars. In April 2023, Taylor Swift's entire catalog drew 9.3 million streams from YouTube Music family-plan subscribers, prosecutors said. Smith's catalog of AI-generated tracks generated 80.9 million streams on the same platform that month.

Prosecutors said Smith pocketed more than $8 million in unearned royalties over more than six years, describing the operation as a "massive fraud." They argued that a stiff sentence is necessary "to provide just punishment" and to deter other white-collar criminals.

"Imposing a substantial term of incarceration will send a clear message that defrauding social services programs, no matter who you are, will result in significant punishment," Assistant U.S. Attorneys Nicholas W. Chiuchiolo and Kevin B. Mead wrote in their letter to the court. "If the public is watching this case, as the defendant claims, a lenient sentence will send precisely the wrong message: streaming fraud will not result in meaningful punishment."

Smith accepted a plea deal from prosecutors in March, pleading guilty to one count of conspiracy to commit wire fraud, which carries a maximum sentence of five years in prison. He also agreed to pay $8,091,843.64 in forfeiture.

His defense tells a different story. In filings last week, Smith and his lawyers said he was "profoundly sorry" for his conduct but insisted he "did not set out to commit a federal crime."

"He believed his initial efforts to be lawful," his lawyers, Noell P. Tin and Justine Harris, wrote to the judge. "Indeed, Mr. Smith consulted with a well-known music attorney with extensive experience in legal operations at music publishing companies. Although he ultimately ended up rationalizing conduct that he knew was wrong — false statements to distributors and increasingly deceptive conduct to avoid scrutiny — his conduct began at a time when the legal parameters were unsettled."

Prosecutors rejected that account in their Tuesday filing. They argued that Smith's "own words and conduct reveal that he knew from the very beginning that his scheme was a form of fraud," and said he knowingly carried out the fraud on a daily basis throughout the six-year period.

U.S. Attorney Jay Clayton framed the case in blunt terms when the plea was announced in March. "Michael Smith generated thousands of fake songs using artificial intelligence and then streamed those fake songs billions of times," Clayton said. "Although the songs and listeners were fake, the millions of dollars Smith stole was real. Millions of dollars in royalties that Smith diverted from real, deserving artists and rights holders. Smith's brazen scheme is over, as he stands convicted of a federal crime for his AI-assisted fraud."

The Oct. 6 sentencing will test how the federal courts weigh a fraud whose tools were novel but whose mechanics — inflating numbers to collect money — were not. With streaming now the dominant revenue engine of the recorded music industry, the sentence Smith receives will signal how much risk future fraudsters face when they point bots at royalty pools.