AI-Generated Music Fraud: Musician Pleads Guilty to $10 Million Scheme

A North Carolina musician has pleaded guilty to defrauding music streaming platforms and fellow artists out of over $10 million in royalty payments by generating thousands of AI-created songs and artificially inflating their stream counts. The case, prosecuted in the Southern District of Modern York, marks one of the first successful criminal prosecutions related to AI-driven fraud in the music industry.

The Scheme Unveiled

Michael Smith, 54, of Cornelius, North Carolina, pleaded guilty to conspiracy to commit wire fraud on March 19, 2026 according to the U.S. Attorney’s Office for the Southern District of New York. Between 2017 and 2024, Smith obtained hundreds of thousands of songs generated by artificial intelligence from an unnamed accomplice. He then uploaded these tracks to major streaming services, including Spotify, Apple Music, Amazon Music, and YouTube Music as reported by BleepingComputer.

To artificially inflate stream counts, Smith employed automated AI bots, accessing the platforms through virtual private networks (VPNs) to evade anti-fraud systems. At the peak of the operation, he utilized over 1,000 bot accounts . He strategically focused on generating a large volume of songs with relatively low stream counts per track, emailing co-conspirators in October 2018 stating, “to not raise any issues with the powers that be we need a TON of content with small amounts of Streams.”

Financial Impact and Prosecution

Smith fraudulently obtained over $10 million in royalty payments. Court documents reveal he estimated daily earnings of $3,307.20, monthly earnings of $99,216, and annual earnings exceeding $1.2 million based on an average royalty rate of half a cent per stream . He initially used his own music before transitioning to AI-generated content.

U.S. Attorney Jay Clayton stated, “Michael Smith generated thousands of fake songs using artificial intelligence and then streamed those fake songs billions of times…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 faces up to five years in prison and is required to forfeit $8,091,843.64. Sentencing is scheduled for July as reported by Billboard.

The Broader Implications for the Music Industry

This case highlights a growing concern within the music industry regarding the potential for AI-generated music and fraudulent streaming practices to undermine legitimate artists and copyright holders. The business model of streaming services, which distributes royalties based on stream counts, is particularly vulnerable to manipulation. The UK government recently abandoned plans to allow AI companies to use copyrighted works without permission, following strong opposition from artists like Elton John, Dua Lipa, and Paul McCartney.

Companies like Suno, which allows users to create AI-generated music, are generating massive volumes of content – approximately 7 million songs per day, equivalent to an entire streaming catalog every two weeks . Deezer reports that 97% of listeners cannot distinguish between human-generated and AI-generated music, with 60,000 AI tracks being added to the service daily.

Suno’s CEO, Paul Sinclair, acknowledged the complexities of the situation, stating, “Truly, every single day I’m conflicted…I want to build sure there’s whole future generations of the beauty of art and music and the ability to build careers around it.”