1
00:00:00,320 --> 00:00:03,279
Speaker 1: This is from a music businessworldwide dot com. I guess

2
00:00:03,319 --> 00:00:06,200
it was only a matter of time before something like

3
00:00:06,240 --> 00:00:11,800
this happened. Streaming fraud man who pocketed eight million dollars

4
00:00:12,519 --> 00:00:17,120
using hundreds of thousands of AI songs streamed billions of

5
00:00:17,199 --> 00:00:21,920
times by bots pleads guilty. So this guy set up

6
00:00:21,960 --> 00:00:26,160
a pretty elaborate scheme here, it says. The man at

7
00:00:26,160 --> 00:00:28,519
the center of what's been described as the first ever

8
00:00:28,640 --> 00:00:32,439
criminal prosecution for AI assisted streaming fraud in the US

9
00:00:32,479 --> 00:00:37,200
has pleaded guilty. Michael Smith of Cornelius, North Carolina, pleaded

10
00:00:37,240 --> 00:00:40,359
guilty on March nineteenth to one count of conspiracy to

11
00:00:40,359 --> 00:00:46,960
commit wirefraud before US District Judge John G. Coelty in

12
00:00:47,039 --> 00:00:49,159
the Southern District of New York. By the way, I

13
00:00:49,159 --> 00:00:54,439
feel like wirefraud is anything that isn't specific to you know,

14
00:00:54,759 --> 00:00:58,200
if it's not shoplifting or murder or something, it's wirefraud.

15
00:00:58,439 --> 00:01:00,560
You ever feel like that, Like just wiref is like

16
00:01:00,600 --> 00:01:02,320
this weird sort of catch all.

17
00:01:02,479 --> 00:01:05,680
Speaker 2: Well, because it ended up morphing into the Internet.

18
00:01:05,400 --> 00:01:09,560
Speaker 1: Right, anything involving anything electronic winds up becoming wirefraud.

19
00:01:09,719 --> 00:01:10,000
Speaker 2: Yep.

20
00:01:11,560 --> 00:01:14,439
Speaker 1: The charge carries a maximum sentence of five years in prison.

21
00:01:14,680 --> 00:01:18,120
Smith has also agreed to pay over eight million dollars

22
00:01:18,159 --> 00:01:21,040
in forfeiture. Wow, why does he actually still have it

23
00:01:21,040 --> 00:01:22,480
as just sitting in a bank account somewhere?

24
00:01:22,480 --> 00:01:23,439
Speaker 2: I wonder like it.

25
00:01:23,799 --> 00:01:27,359
Speaker 1: Smith is schedule to be sentenced on July twenty nine.

26
00:01:27,879 --> 00:01:32,280
US attorney Jay Clayton said, quote, Michael Smith generated thousands

27
00:01:32,319 --> 00:01:37,480
of fake songs using artificial intelligence and then streamed those

28
00:01:37,560 --> 00:01:42,400
fake songs billions of times. Although the songs and listeners

29
00:01:42,400 --> 00:01:46,799
were fake, the millions of dollars Smith stole was real,

30
00:01:47,400 --> 00:01:51,159
millions of dollars in royalties that Smith diverted from real

31
00:01:51,239 --> 00:01:56,519
deserving artists and rights holders. Unquote. So the guy, so

32
00:01:56,599 --> 00:02:00,040
he figured out, I mean, it's creative and ambitious. He

33
00:02:00,040 --> 00:02:02,359
figured out how to creat all these AI songs and

34
00:02:02,400 --> 00:02:05,920
then create bots that would stream them, because obviously the

35
00:02:05,959 --> 00:02:07,719
more streams you get, the more money you get if

36
00:02:07,719 --> 00:02:08,400
you're the artist.

37
00:02:09,039 --> 00:02:10,919
Speaker 2: That's the thing right there. It's not so much the

38
00:02:11,000 --> 00:02:15,000
creating the songs with AI as it is the creating

39
00:02:15,039 --> 00:02:17,400
the bots and getting them to play the songs over

40
00:02:17,439 --> 00:02:19,960
and over and over against so he could get money. Right,

41
00:02:20,520 --> 00:02:24,520
That's the that's the real stinky part. Yeah, And in

42
00:02:24,599 --> 00:02:26,800
that I do agree that it is taking money away

43
00:02:26,840 --> 00:02:29,360
from jenuine artists.

44
00:02:28,759 --> 00:02:33,960
Speaker 1: Right, it says. Smith was first arrested in September twenty

45
00:02:34,039 --> 00:02:37,280
twenty four in what was the first criminal case of

46
00:02:37,319 --> 00:02:40,280
its kind in the US. Like I said, it was

47
00:02:40,319 --> 00:02:44,800
inevitable at that time. He was charged with three felony counts,

48
00:02:44,960 --> 00:02:51,000
wire fraud, wire fraud conspiracy, and money laundering conspiracy, each

49
00:02:51,039 --> 00:02:54,319
carrying a maximum sentence of twenty years in prison. As

50
00:02:54,400 --> 00:02:57,719
Music Bausiness Worldwide report it, Smith initially pleaded not guilty

51
00:02:57,759 --> 00:03:00,520
in front of the judge in September twenty twenty and

52
00:03:00,639 --> 00:03:06,080
was released on a half million dollars bail. And by

53
00:03:06,120 --> 00:03:08,759
the way, if any of those charges sound redundant, wire fraud,

54
00:03:08,879 --> 00:03:13,360
wire fraud conspiracy, money laundering conspiracy. You know when they

55
00:03:13,400 --> 00:03:15,639
when they charge you with these things, they they try

56
00:03:15,680 --> 00:03:18,360
to charge you with everything they possibly can, right, so

57
00:03:18,400 --> 00:03:21,080
that see what can stick? See what can stick? Or

58
00:03:21,199 --> 00:03:22,439
if there ends up in.

59
00:03:22,479 --> 00:03:24,960
Speaker 2: Charge per instance, So if there's one instance and then

60
00:03:25,000 --> 00:03:28,039
there's another instance, then that's two charges.

61
00:03:28,120 --> 00:03:31,280
Speaker 1: And if there ends up being an opportunity for some

62
00:03:31,319 --> 00:03:33,719
sort of a plea deal, you don't want to, you know,

63
00:03:34,159 --> 00:03:35,960
if you're the prosecutors you want to be able to

64
00:03:35,960 --> 00:03:38,560
negotiate from you know, you want to have as many

65
00:03:38,599 --> 00:03:41,919
things on the table as possible, right, So you know,

66
00:03:41,960 --> 00:03:45,400
if you in other words, if if the uh, if

67
00:03:45,400 --> 00:03:49,000
the defense wants to plead something down, well you got

68
00:03:49,039 --> 00:03:52,879
to have as many things available to plead down from. Right.

69
00:03:53,479 --> 00:03:53,759
Speaker 2: Yep.

70
00:03:54,479 --> 00:03:58,159
Speaker 1: So it says today's guilty plea to a single conspiracy

71
00:03:58,240 --> 00:04:02,319
count carrying a max. So they did. They did a

72
00:04:02,319 --> 00:04:05,879
plead down carrying a maximum of five years rather than

73
00:04:05,919 --> 00:04:10,360
the combined sixty years he previously faced. Represents a significant

74
00:04:10,360 --> 00:04:15,280
reduction in Smith's legal exposure. According to the charging documents

75
00:04:15,280 --> 00:04:18,240
and statements made in court, Smith created thousands of bought

76
00:04:18,240 --> 00:04:22,399
accounts on streaming platforms including Amazon Music, Apple Music, Spotify,

77
00:04:22,480 --> 00:04:26,319
and YouTube Music, and used software to cause those accounts

78
00:04:26,399 --> 00:04:31,120
to continuously stream songs that he owned. Smith spread his

79
00:04:31,279 --> 00:04:35,839
automated streams across thousands of songs to avoid triggering the

80
00:04:35,839 --> 00:04:40,199
platform's anti fraud detection systems. To obtain the volume of

81
00:04:40,240 --> 00:04:43,319
tracks needed for the scheme to work, Smith turned to AI,

82
00:04:43,800 --> 00:04:47,600
using it to generate hundreds of thousands of songs. Those

83
00:04:47,639 --> 00:04:51,600
songs were streamed by his bought accounts billions of times

84
00:04:51,959 --> 00:04:56,160
allowing him to fraudulently collect more than eight million dollars

85
00:04:56,160 --> 00:05:00,439
in royalties at the peak of his operation. According to

86
00:05:00,439 --> 00:05:04,319
the Department of Justice, Smith estimated that his bots could

87
00:05:04,360 --> 00:05:09,439
generate approximately six hundred sixty one thousand, four hundred and

88
00:05:09,480 --> 00:05:14,160
forty streams per day, yielding annual royalties of over one

89
00:05:14,199 --> 00:05:18,759
point two million. The Mechanical Licensing Collective the MLC, which

90
00:05:18,839 --> 00:05:22,040
distributes mechanical royalties from streaming in the US, played a

91
00:05:22,079 --> 00:05:25,839
key role in identifying the fraud scheme. In a statement

92
00:05:25,920 --> 00:05:29,720
following today's guilty plea, the MLC said, quote, Today's news

93
00:05:29,800 --> 00:05:32,600
highlights the serious threat that streaming fraud poses to the

94
00:05:32,639 --> 00:05:36,879
music industry and the important role the MLC plays and

95
00:05:36,920 --> 00:05:40,519
confronting it. We appreciate the Department of Justice's swift action,

96
00:05:41,000 --> 00:05:45,120
recognizing that the MLC identified the fraud early, challenged Smith

97
00:05:45,199 --> 00:05:48,959
and his representatives, and prevented the diversion of mechanical royalties

98
00:05:49,000 --> 00:05:52,319
away from rightful songwriters. The MLC will continue to invest

99
00:05:52,360 --> 00:05:55,560
in anomaly detection and fraud prevention to protect our members,

100
00:05:56,279 --> 00:06:00,000
and we will continue to collaborate with other industry organizations

101
00:06:00,279 --> 00:06:05,680
and law enforcement to protect all songwriting royalties unquote. The

102
00:06:05,800 --> 00:06:10,360
MLC had previously raised concerns about Smith's catalog, questioning how

103
00:06:10,360 --> 00:06:14,240
he could produce such a high volume of music so quickly.

104
00:06:14,680 --> 00:06:18,040
Smith and his representatives denied at the time that his

105
00:06:18,199 --> 00:06:19,959
works were AI generated.

106
00:06:21,199 --> 00:06:24,639
Speaker 2: Well, of course, he's trying to game the system, and

107
00:06:24,720 --> 00:06:27,639
he did. His problem was he was too greedy. He

108
00:06:27,639 --> 00:06:29,720
didn't quit while it was his head. Now he's in jail.

109
00:06:30,079 --> 00:06:32,600
Speaker 1: Yeah, well that's what happens. I mean true, you know,

110
00:06:33,160 --> 00:06:35,399
that's that's how people get caught. They get greedy.

111
00:06:35,560 --> 00:06:40,160
Speaker 2: Yep, you know, thousands of songs though. Wow, Yeah, he

112
00:06:40,240 --> 00:06:43,319
definitely was was determined.

113
00:06:43,680 --> 00:06:45,399
Speaker 1: Yeah, but it is.

114
00:06:45,439 --> 00:06:48,279
Speaker 2: Crappy if that's happened. With that happening, that it does

115
00:06:48,399 --> 00:06:50,560
rip off for a artist, because you know, all he's

116
00:06:50,600 --> 00:06:53,800
doing is just game in the system with these bots

117
00:06:53,839 --> 00:06:56,759
that are playing the song. It's not human. Nobody's hearing

118
00:06:56,759 --> 00:07:01,040
it for real, it's just a computer program playing repeat.

119
00:07:01,399 --> 00:07:06,839
Speaker 1: But also in doing that, you know everything that you

120
00:07:06,920 --> 00:07:11,560
do online leaves a digital footprint. It's it's like he

121
00:07:11,639 --> 00:07:14,000
had to know on some level eventually he was going

122
00:07:14,040 --> 00:07:16,199
to get caught unless he was just so blinded by

123
00:07:16,240 --> 00:07:19,920
his screen. That's something I'm always fascinated by when when

124
00:07:19,959 --> 00:07:23,040
I see stories like this is the psychology of it

125
00:07:23,079 --> 00:07:26,920
is very interesting to me because they must know on

126
00:07:27,040 --> 00:07:30,639
some level, whether they're admitting the admitting it to themselves

127
00:07:30,720 --> 00:07:33,839
or not. Maybe it's subconscious, but they must know they're

128
00:07:33,839 --> 00:07:37,720
going to get caught because everything that you do online,

129
00:07:38,079 --> 00:07:38,600
you know, it's.

130
00:07:38,480 --> 00:07:40,399
Speaker 2: Like a bag. I think they think they're not going

131
00:07:40,480 --> 00:07:42,680
to get caught. Maybe they're going to get away with

132
00:07:42,720 --> 00:07:45,319
it because they figured something new out, or maybe they

133
00:07:45,360 --> 00:07:47,439
figured out how to use the computer a different way.

134
00:07:48,000 --> 00:07:51,199
Speaker 1: Bank robberies always make me think about this too, Like

135
00:07:51,240 --> 00:07:52,000
whenever I see a.

136
00:07:51,920 --> 00:07:53,560
Speaker 2: Story, ever hear one getting away.

137
00:07:53,680 --> 00:07:55,519
Speaker 1: Well, that's the thing, whenever I see a story about

138
00:07:55,519 --> 00:07:57,439
a bank robbery, it's always to me, it's always like

139
00:07:57,720 --> 00:08:01,720
people still even attempt to rob banks. There's there's no

140
00:08:01,800 --> 00:08:03,079
chance you're gonna get away with it.

141
00:08:03,519 --> 00:08:05,399
Speaker 2: When's the last time we heard of somebody actually getting

142
00:08:05,399 --> 00:08:05,920
away with it?

143
00:08:05,920 --> 00:08:09,279
Speaker 1: It doesn't happen exactly. I mean, Bonnie and Clyde didn't

144
00:08:09,279 --> 00:08:11,279
get away with it in the year you know, twenty

145
00:08:11,319 --> 00:08:13,800
twenty six. With all the technology that we have, nobody's

146
00:08:13,839 --> 00:08:16,839
getting away with that. But where people still try, like

147
00:08:16,920 --> 00:08:19,680
somebody will still walk into a bank and just hand

148
00:08:19,720 --> 00:08:21,959
the teller a note and think that they're gonna that

149
00:08:22,000 --> 00:08:23,120
they're gonna get away with it.

150
00:08:23,319 --> 00:08:26,279
Speaker 2: Why do you think there's so many Karen videos? What

151
00:08:26,319 --> 00:08:29,199
do you mean there's so many videos of people doing

152
00:08:29,240 --> 00:08:33,960
bad behaviors? Oh yeah, because people too bad behaviors fite

153
00:08:34,000 --> 00:08:37,039
the fact that you should be smart enough to know

154
00:08:37,080 --> 00:08:38,200
there's a camera everywhere.

155
00:08:38,200 --> 00:08:40,840
Speaker 1: Well yeah, but I'm talking. I'm talking specifically about crime

156
00:08:40,879 --> 00:08:42,360
and just the things that people think they're going to

157
00:08:42,399 --> 00:08:43,799
get away with or you know.

158
00:08:43,799 --> 00:08:46,600
Speaker 2: Same category in my book, or the or the cut.

159
00:08:46,639 --> 00:08:47,679
Speaker 1: Well, you know, we open.

160
00:08:47,519 --> 00:08:48,840
Speaker 2: The think they're gonna get away with it.

161
00:08:48,840 --> 00:08:51,759
Speaker 1: Look what we opened the show with the cops rated

162
00:08:51,840 --> 00:08:54,360
Afroman's home. Yep, they didn't get away with it. There

163
00:08:54,360 --> 00:08:56,759
were cameras all throughout get away. Thought they were going

164
00:08:56,799 --> 00:08:57,279
to get away with that.

165
00:08:57,320 --> 00:08:59,120
Speaker 2: Yeah, Then when they realized there were cameras, they cut

166
00:08:59,120 --> 00:09:00,679
the cameras. But now it was too late.

167
00:09:00,879 --> 00:09:01,120
Speaker 1: Yep.

168
00:09:01,360 --> 00:09:03,399
Speaker 2: Yeah, and that just made them look all the more guilty.

169
00:09:04,000 --> 00:09:07,200
Speaker 1: The other question this raises in my mind is how

170
00:09:07,200 --> 00:09:09,559
many other people are doing this? You just haven't been caught.

171
00:09:09,600 --> 00:09:11,679
Speaker 2: There's gonna be some kind of a program that allows

172
00:09:11,679 --> 00:09:15,840
people to create these bought accounts as well. Yeah, because

173
00:09:16,440 --> 00:09:18,240
on the other side is seeing that as a human.

174
00:09:20,279 --> 00:09:23,879
Speaker 1: Yeah, well, this guy was obviously very very smart. I mean,

175
00:09:23,919 --> 00:09:26,679
he's probably got a genius till now. Yeah, but he's

176
00:09:26,679 --> 00:09:28,600
probably well, I mean, his judgment is one thing, but

177
00:09:28,679 --> 00:09:30,120
in terms of being able to pull this off, and

178
00:09:30,240 --> 00:09:32,480
he's probably got a genius level IQ to be able

179
00:09:32,480 --> 00:09:33,879
to figure out how to do all that and then

180
00:09:33,919 --> 00:09:35,559
get away with it for as long as he did.

181
00:09:35,480 --> 00:09:37,639
Speaker 2: Create a thousands of Like, how do you create that

182
00:09:37,679 --> 00:09:39,960
many songs? How do you create that many accounts?

183
00:09:40,080 --> 00:09:40,200
Speaker 1: Right?

184
00:09:40,519 --> 00:09:42,759
Speaker 2: I can't imagine how many bought accounts he had, right

185
00:09:42,960 --> 00:09:44,799
to get them to play enough to get him that

186
00:09:44,879 --> 00:09:45,480
kind of money?

187
00:09:45,679 --> 00:09:46,919
Speaker 1: Yeah, what was it?

188
00:09:46,960 --> 00:09:49,759
Speaker 2: A mill a month or something like that?

189
00:09:50,000 --> 00:09:51,159
Speaker 1: No, one year?

190
00:09:51,320 --> 00:09:51,759
Speaker 2: Oh, a year?

191
00:09:51,960 --> 00:09:53,600
Speaker 1: So he did this over the course of years.

192
00:09:55,440 --> 00:09:57,600
Speaker 2: Be like, you got a million, go away right, right?

193
00:09:57,679 --> 00:09:58,879
Speaker 1: Yeah, you do it for a year and then you

194
00:09:58,879 --> 00:10:02,200
get out. Yeah, take a million and go comfortably, take

195
00:10:02,240 --> 00:10:04,519
a million, invest it, and you know, live.

196
00:10:04,440 --> 00:10:06,600
Speaker 2: Comfortably for the rest of your life. But not not

197
00:10:06,600 --> 00:10:11,279
not greed, grotesque greed. Ah, yes, do we not talk

198
00:10:11,320 --> 00:10:12,240
about that all the time.

199
00:10:12,360 --> 00:10:13,960
Speaker 1: I don't want to give anybody the wrong idea though.

200
00:10:13,960 --> 00:10:15,879
We're not suggesting that it would have been okay if

201
00:10:15,879 --> 00:10:17,799
he had just done this for a year. And you know, no,

202
00:10:17,840 --> 00:10:21,360
we're not. We're not condoning it. No, we're not condoning crime.

203
00:10:21,399 --> 00:10:24,159
I mean, this is criminal activity, and it stinks.

204
00:10:23,879 --> 00:10:26,559
Speaker 2: Because it takes a lot of attention away from real artists.

205
00:10:27,320 --> 00:10:30,240
And plus those illicit plays are going to show up.

206
00:10:30,240 --> 00:10:33,879
They're gonna try and make those songs go viral by

207
00:10:33,919 --> 00:10:38,360
their plays. Yeah, so it messes up a lot for

208
00:10:38,480 --> 00:10:40,519
a lot of real people and real artists.

209
00:10:40,759 --> 00:10:47,399
Speaker 1: Yeah, so that's stinky. Absolutely, it was a little bit

210
00:10:47,399 --> 00:10:50,279
more to this. The case was prosecuted by the Complex

211
00:10:50,360 --> 00:10:53,679
Fraud and Cyber Crime Unit of the US Attorney's Office

212
00:10:53,720 --> 00:10:58,799
for the SDN Y. Assistant US attorneys Nicholas Chucciello and

213
00:10:58,919 --> 00:11:03,279
Kevin Mead led the prosecution. The original indictment named unnamed.

214
00:11:03,320 --> 00:11:08,080
Oh this is interesting, named unnamed co conspirators, including the

215
00:11:08,120 --> 00:11:11,039
CEO of an AI music company and a music promoter

216
00:11:11,360 --> 00:11:15,320
who helped Smith produce the AI generated tracks. The legal

217
00:11:15,360 --> 00:11:18,679
status their legal status has not yet been publicly disclosed.

218
00:11:19,320 --> 00:11:19,440
Speaker 2: Oh.

219
00:11:19,480 --> 00:11:21,399
Speaker 1: Because one of the things he was originally charged with

220
00:11:21,679 --> 00:11:25,360
was conspiracy. Smith's case.

221
00:11:26,000 --> 00:11:27,600
Speaker 2: The p that there are other people involved.

222
00:11:27,759 --> 00:11:28,000
Speaker 1: Yeah.

223
00:11:28,159 --> 00:11:29,279
Speaker 2: Yeah.

224
00:11:29,279 --> 00:11:32,679
Speaker 1: His case is the highest profile criminal prosecution for streaming

225
00:11:32,720 --> 00:11:36,080
fraud globally, but it's not the only one. In Denmark,

226
00:11:36,159 --> 00:11:38,919
a man was sentenced to eighteen months in prison in

227
00:11:38,960 --> 00:11:41,639
March twenty twenty four after being found guilty of data

228
00:11:41,679 --> 00:11:45,120
fraud and copyright infringement for using bots to inflate the

229
00:11:45,120 --> 00:11:48,000
stream count on six hundred and eighty nine tracks uploaded

230
00:11:48,000 --> 00:11:51,960
to platforms including Apple Music, Spotify, and U See Music.

231
00:11:52,639 --> 00:11:57,639
That sentence was subsequently increased by to twenty four months

232
00:11:57,919 --> 00:12:00,879
by the Western High Court of Denmark in February of

233
00:12:00,919 --> 00:12:04,879
twenty five after judges found evidence of more extensive fraudow

234
00:12:05,159 --> 00:12:08,240
than initially proven. So apparently in their system in Denmark

235
00:12:08,279 --> 00:12:08,799
you can.

236
00:12:09,000 --> 00:12:13,960
Speaker 2: Double JEOPARDI they could just up your up your sentence. Wow.

237
00:12:15,039 --> 00:12:16,559
Speaker 1: I think they can do that in the US too.

238
00:12:16,559 --> 00:12:19,240
It just doesn't happen for your sentence. I feel like

239
00:12:20,639 --> 00:12:24,200
I feel like there was a weird case charged you

240
00:12:24,240 --> 00:12:27,039
with something. There was something in the United States where

241
00:12:27,080 --> 00:12:30,759
something like that was done, and I think that this

242
00:12:30,919 --> 00:12:32,639
was a while ago. I'll have to look it up.

243
00:12:32,840 --> 00:12:35,799
I think there's something like that was done where a judge,

244
00:12:36,759 --> 00:12:41,120
a higher court judge overruled somebody else's Oh you know

245
00:12:41,159 --> 00:12:44,559
what I think it was. So a judge had reduced

246
00:12:45,000 --> 00:12:51,879
somebody's sentence, and then another judge overturned the reduction and

247
00:12:51,960 --> 00:12:55,080
restored the original sentence. It was something weird, and it

248
00:12:55,120 --> 00:12:59,080
was it was something no, not exactly but well it

249
00:12:59,080 --> 00:13:02,279
did effectively add or time. But there was something weird

250
00:13:02,559 --> 00:13:04,600
like that that happened in the US that made people

251
00:13:04,639 --> 00:13:07,960
really upset. Because it's in theory, so that's not supposed

252
00:13:07,960 --> 00:13:08,279
to happen.

253
00:13:08,279 --> 00:13:08,360
Speaker 2: But