AI Music Fraud: Man Ordered to Pay $8M in First Criminal Case

A North Carolina man has agreed to pay more than $8 million after pleading guilty to federal charges in what authorities are calling the first criminal case of its kind involving music streaming fraud. Mike Smith, of North Carolina, admitted to conspiring to commit wire fraud, according to the U.S. Attorney’s Office for the Southern District of Modern York.

The indictment, initially filed in 2024, alleged Smith utilized artificial intelligence to generate a vast catalog of songs, which were then streamed millions of times through a network of bots and fraudulent accounts. The scheme allowed Smith to collect royalties intended for legitimate artists, defrauding streaming services out of approximately $8.1 million, officials said.

“Smith’s brazen scheme is over, as he stands convicted of a federal crime for his AI-assisted fraud,” U.S. Attorney Jay Clayton stated Thursday. Smith’s guilty plea carries a maximum sentence of five years in prison, in addition to the financial restitution.

The case highlights a growing concern within the music industry regarding streaming fraud, a problem that has been significantly amplified by the advent of AI-generated music. Deezer, a French music streaming service, has reported receiving as many as 60,000 AI-generated songs daily, with an estimated 85 percent of streams on those tracks being fraudulent, according to reports.

The proliferation of AI-generated content has prompted streaming services to bolster their fraud detection measures. Apple Music recently doubled its penalties for fraudulent streaming activity, citing the increasing impact of AI as a contributing factor, as reported by The Hollywood Reporter in February.

The U.S. Attorney’s Office stated Smith will be required to return the $8.1 million he illicitly obtained through the fraudulent scheme. Sentencing is pending.