A 52-year-old North Carolina musician, Michael Smith, has pleaded not guilty to charges related to an alleged $10 million streaming fraud scheme. US District Judge John Koeltl set bail at $500,000 during proceedings in Manhattan.

The US government indicted Smith on three felony counts for allegedly creating hundreds of thousands of AI-generated songs and using bots to artificially stream them billions of times. According to the indictment, Smith employed various fraudulent methods, including:

• Creating fake email accounts
• Setting up fraudulent cloud service accounts
• Purchasing family plans on streaming platforms
• Using bots to generate 661,440 streams daily
• Targeting approximately $1.2 million in annual royalties

Spotify confirmed that their platform accounted for less than 1% (approximately $60,000) of the total fraudulent earnings, crediting their robust anti-fraud measures. An unnamed streaming service identified as "Streaming Platform-1" detected the suspicious activity and suspended Smith's royalty payments in 2019.

The Mechanical Licensing Collective also identified irregularities in Smith's streaming data and withheld associated royalty payments. This case highlights the growing concern of streaming fraud, which according to Beatdapp, costs artists approximately $2 billion in lost royalties annually.

The case is ongoing in the United States District Court as United States v. SMITH.

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