Musician Charged With Artificially Inflating Music Streams That Earned $10 Million

In what is most likely the first criminal case involving artificially increasing music streams, one musician has been charged with fraudulently inflating music streams. Michael Smith was charged with developing a scheme to create hundreds of thousands of songs with artificial intelligence and using bots to stream the AI-generated songs billions of times.

As a result of the scheme, Smith fraudulently garnered more than 10 million USD in royalties resulting from the automated streams of AI-generated music.

Smith, 52, who resides in Cornelius, North Carolina, is charged with wire fraud conspiracy, which carries a maximum sentence of 20 years in prison; wire fraud, which carries a maximum sentence of 20 years in prison; and money laundering conspiracy, which carries a maximum sentence of 20 years in prison.

It is important to note that Smith has only been charged with the above crimes, and he will be presented before a court of law to decide whether he is guilty of these crimes.

Damian Williams, the United States Attorney for the Southern District of New York, and Christie M. Curtis, the Acting Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation, announced that the indictment had been unsealed on 4 September 2024.

Damian Williams went on to say,

As alleged, Michael Smith fraudulently streamed songs created with artificial intelligence billions of times in order to steal royalties. Through his brazen fraud scheme, Smith stole millions in royalties that should have been paid to musicians, songwriters, and other rights holders whose songs were legitimately streamed. Today, thanks to the work of the FBI and the career prosecutors of this Office, it’s time for Smith to face the music.

While Christie M. Curtis stated,

Michael Smith allegedly produced hundreds of thousands of songs with artificial intelligence and utilized automatic features to repeatedly stream the music to generate unlawful royalties to the tune of $10 million. The defendant’s alleged scheme played upon the integrity of the music industry by a concerted attempt to circumvent the streaming platforms’ policies. The FBI remains dedicated to plucking out those who manipulate advanced technology to receive illicit profits and infringe on the genuine artistic talent of others.

To carry out this scheme, Smith created thousands of accounts on Streaming Platforms like Spotify and Apple Music that he could use to stream songs. These accounts functioned as bots.

He then used software to cause the bot accounts to continuously stream songs that he had created, using AI. At a certain point in the charged time period, Smith estimated that he could use the bot accounts to generate approximately 661,440 streams per day, earning annual royalties of 1,207,128 USD.

AI and Fraud

The above case may be the first of its kind to see the inside of a courtroom, but it will go down as another instance of AI being used to commit online crime. The boom of AI services like ChatGPT, which use large language models to provide services to the public at large, has not gone unnoticed by threat actors and scammers.

Writing on the threat posed by AI to individuals and corporations, in particular the banking sector, Deloitte stated,

Some fraud types may be more vulnerable to generative AI than others. For example, business email compromises, one of the most common types of fraud, can cause substantial monetary loss, according to the FBI’s Internet Crime Complaint Center’s data, which tracks 26 categories of fraud. Fraudsters have been compromising individual and business email accounts through social engineering to conduct unauthorized money transfers for years. However, with gen AI, bad actors can perpetrate fraud at scale by targeting multiple victims at the same time using the same or fewer resources. In 2022 alone, the FBI counted 21,832 instances of business email fraud with losses of approximately US$2.7 billion. The Deloitte Center for Financial Services estimates that generative AI email fraud losses could total about US$11.5 billion by 2027 in an “aggressive” adoption scenario.

While Deloitte focuses on using generative AI to superpower fraud, there is much debate as to what precisely generative AI is. This is beyond the scope of this article, as the focus will be on how AI is changing the fraud landscape.

One of the problems with defending against AI-powered fraud is older methods of detection that require setting up rules and decision trees are proving to be less viable, given the speed at which AI schemes can pivot and mutate.

The banking sector has developed several AI countermeasures, including using AI to automate processes that diagnose fraud and send investigations to the appropriate team at the bank.

Some banks are already incorporating large language models to detect signs of fraud. Mastercard, in particular, is working on its Decision Intelligence tool, which scans a trillion data points to predict if a transaction is genuine.

While these examples are unrelated to the above criminal case, they further prove that AI is being used maliciously, but the technology can be used to prevent fraud schemes and cyber threats.

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