The AI streaming fraud case just made federal history. A North Carolina musician has admitted to running up millions in fake royalties using artificially generated music and inflated streaming numbers, according to U.S. prosecutors.
Michael Smith, 54, pleaded guilty to one count of wire fraud conspiracy on March 19 in federal court in New York. Prosecutors say he created and distributed AI-generated tracks, then used fraudulent streaming activity to boost plays and collect payouts. Because of that setup, the scheme allegedly pulled in about $8 million in royalties.
Smith has agreed to forfeit the full $8 million tied to the operation. He now faces a maximum sentence of up to five years in prison, although the final outcome will be decided by a judge.
This case stands out because federal authorities are calling it the first criminal prosecution centered on streaming fraud tied to AI-generated music. So while streaming manipulation has been an issue for years, this situation brings new attention to how AI tools can be used to game the system at scale.
