The music industry has welcomed the imprisonment of Michael Smith, the streaming fraudster who made millions by uploading AI-generated tracks to digital music platforms and then artificially boosting streams of that music.
It’s the first conviction of a streaming fraudster in the US and one of the first worldwide. He was yesterday sentenced to eighteen months in prison. Although prosecutors were pushing for a custodial sentence closer to four years, it’s still significant that Smith will serve jail time.
Music industry groups, including the Music Fights Fraud Alliance, backed the prosecution in arguing that a custodial sentence was necessary in this high profile case. In a submission to the court, MFFA stressed that there is currently a “perceived lack of a legal risk” when it comes to stream manipulation, making people more likely to pursue this kind of fraud.
The Recording Industry Association Of America is among those to welcome yesterday’s sentencing, saying in a statement that “streaming fraud harms creators and deceives fans”, and therefore “we appreciate the court recognising the significance of this harmful conduct and the ill-gotten gains that come from the pockets of real artists, songwriters and their label partners”.
Streaming fraud - where people artificially boost the streams of tracks, either to make them look more popular than they really are and/or to pull money out of the streaming royalty pool - has been a major concern of the music industry for many years now.
Because music streaming operates on a revenue share model - with each platform sharing its revenues with artists, record labels, songwriters and music publishers each month - when money is allocated to scammers who artificially boost streams, that means there is less money to share with everyone else.
The battle against streaming fraud is multi-layered, of course, and - among other things - involves streaming services and music distributors putting in place various technical checks and ‘know your customer’ processes, and regulators and industry groups taking legal action against companies that sell stream manipulation as a service.
But there also needs to be at least some criminal action taken against prolific streaming fraudsters to ensure there is a decent deterrent, with the specific legal claims against such people varying from country to country. Such action was previously taken by the authorities in Denmark, before this case was instigated in the US.
After being charged in relation to his streaming scam, Michael Smith pleaded guilty to one count of wire fraud conspiracy and agreed to return the $8 million he had generated through streaming fraud from 2017 to 2024.
His legal team argued that he should avoid jail time, among other things claiming that his scam didn’t really impact on any artists or songwriters, and that the “enormous media attention” of his conviction provided a deterrent for other scammers. But the prosecution and industry groups disputed both those claims.
According to Law360, prosecutor Nicholas Chiuchiolo also stressed that Smith ran his scam for many years, and that he lied when streaming services spotted possible fraudulent activity and queried his conduct. Chiuchiolo told the judge Smith “knew from the very beginning that what he was doing was wrong”, adding, “this was a serious crime that lasted for many years”.
Judge John G Koeltl also honed in on the length of Smith’s scam when explaining his sentencing decision, calling the fraud “extremely serious”, and observing that “the defendant orchestrated a scheme to steal millions of dollars of musical royalties”.
During the sentencing, a tearful Smith told the court “I broke the law, I lied, I cut corners, I did things the wrong way in every aspect”, before adding “I am deeply sorry for what I did” and “I accept whatever punishment the court imposes”. He added that he hopes to work in audio production after serving time in order to be able to pay back the $8 million he scammed out of the system.
The prosecution against Smith was pursued by the office of the US Attorney for the Southern District of New York, led by Jamie McDonald.
He also issued a statement on the sentencing, stating that Smith “exploited super intelligence technology to generate a fraud. By flooding music streaming platforms with automated bots in the place of consumers, and fake songs in the place of creativity, Smith robbed millions in royalty payments from genuine artists and their fans”.
He adds, “This office is committed to ensuring the integrity of all markets and protecting the public from those who use super intelligence for fraud”.