The Music Fights Fraud Alliance has shared its submission to the New York court that will next week sentence streaming fraudster Michael Smith.
The music industry grouping - which brings together distributors, collecting societies and streaming services - asks the judge to impose a sentence that “reflects the unprecedented scope and systemic harm of Mr Smith’s fraud that targeted artists, songwriters and the greater digital music ecosystem”.
Prosecutors in the case have recommended “a substantial custodial sentence of at least 46 months imprisonment” after Smith pleaded guilty to one count of wire fraud conspiracy in relation to an $8 million streaming fraud scam that he ran from 2017 to 2024.
But lawyers for Smith, who has agreed to forfeit all the money he made through his streaming fraud, recently presented arguments for why their client should avoid jail time entirely.
Among other things they argued that “no individual artist or songwriter suffered any perceptible harm” as a result of Smith artificially boosting the streams of hundreds of thousands of AI-generated tracks that he uploaded to the streaming services. Meanwhile, they said, Smith’s prosecution has received “enormous media attention” which should act as a deterrent to other people involved in streaming fraud.
Of course, that latter argument is somewhat flawed, in that Smith’s high profile prosecution only acts as a deterrent if the ramifications of his fraud are significant.
The US Department Of Justice pointed this out in its own submission to the court on Monday, stating, “if the public is watching this case, as the defendant claims, a lenient sentence will send precisely the wrong message", which is to say that “streaming fraud will not result in meaningful punishment”.
And, the MFFA stresses in its submission, if that is the message Smith’s sentencing sends out into the world, that will majorly hinder the music industry’s ongoing battle with streaming fraud.
It notes that this is “the first criminal prosecution for music streaming fraud in US history”, and has “become a widely watched case across the music industry, the broader creative and technology sectors, and, importantly, amongst similar actors who have been engaging in streaming fraud activity”. Which means current and potential streaming fraudsters will be monitoring how this case concludes.
The battle against streaming fraud is multi-layered, and mainly involves the streaming services and the music industry putting in place technical measures and know-your-customer checks, while taking legal action against those selling stream manipulation as a service. However, it also requires some criminal action and the fraudsters need to know that that action will result in significant penalties.
The MFFA continues, “Stakeholders across the music supply chain - including MFFA member companies - are investing significantly in trust and safety resources, talent and technologies”.
But, “despite these best preventative countermeasures”, streaming fraud continues due to “its relative ease and inherent incentive structure, coupled with a perceived lack of a legal risk”. Smith's sentencing will impact on that perception of risk, or lack thereof.
MFFA’s submission also disputes the suggestion that Smith’s fraud didn’t impact on artists and songwriters, because - of course - with music streaming there is a finite royalty pool each month and, if some of that money goes to tracks that have been artificially boosted by fraudsters, there is less money to be shared with everyone else.
It explains, “fraudulently generated streams reduce the per‑stream royalty rate for all legitimate creators because streaming royalties are drawn from a finite, shared royalty pool. Every fraudulent stream perpetrated by Mr Smith diluted the value of every legitimate stream occurring during the same accounting period”.
“Put plainly”, it goes on, the $8,091,843.64 generated by Smith's streaming scam “came at the expense of the creators whose rightful royalties were siphoned away”.
And while the industry’s “technical countermeasures” and civil litigation are “vital”, MFFA insist, “they alone cannot right the wrong Mr Smith inflicted on the creative community or deter the financial incentives driving similar behaviour by other actors”.
Smith will be sentenced on Tuesday.