Speaker 1: This is from a music businessworldwide dot com. I guess
it was only a matter of time before something like
this happened. Streaming fraud man who pocketed eight million dollars
using hundreds of thousands of AI songs streamed billions of
times by bots pleads guilty. So this guy set up
a pretty elaborate scheme here, it says. The man at
the center of what's been described as the first ever
criminal prosecution for AI assisted streaming fraud in the US
has pleaded guilty. Michael Smith of Cornelius, North Carolina, pleaded
guilty on March nineteenth to one count of conspiracy to
commit wirefraud before US District Judge John G. Coelty in
the Southern District of New York. By the way, I
feel like wirefraud is anything that isn't specific to you know,
if it's not shoplifting or murder or something, it's wirefraud.
You ever feel like that, Like just wiref is like
this weird sort of catch all.
Speaker 2: Well, because it ended up morphing into the Internet.
Speaker 1: Right, anything involving anything electronic winds up becoming wirefraud.
Speaker 2: Yep.
Speaker 1: The charge carries a maximum sentence of five years in prison.
Smith has also agreed to pay over eight million dollars
in forfeiture. Wow, why does he actually still have it
as just sitting in a bank account somewhere?
Speaker 2: I wonder like it.
Speaker 1: Smith is schedule to be sentenced on July twenty nine.
US attorney Jay Clayton said, quote, Michael Smith generated thousands
of fake songs using artificial intelligence and then streamed those
fake songs billions of times. Although the songs and listeners
were fake, the millions of dollars Smith stole was real,
millions of dollars in royalties that Smith diverted from real
deserving artists and rights holders. Unquote. So the guy, so
he figured out, I mean, it's creative and ambitious. He
figured out how to creat all these AI songs and
then create bots that would stream them, because obviously the
more streams you get, the more money you get if
you're the artist.
Speaker 2: That's the thing right there. It's not so much the
creating the songs with AI as it is the creating
the bots and getting them to play the songs over
and over and over against so he could get money. Right,
That's the that's the real stinky part. Yeah, And in
that I do agree that it is taking money away
from jenuine artists.
Speaker 1: Right, it says. Smith was first arrested in September twenty
twenty four in what was the first criminal case of
its kind in the US. Like I said, it was
inevitable at that time. He was charged with three felony counts,
wire fraud, wire fraud conspiracy, and money laundering conspiracy, each
carrying a maximum sentence of twenty years in prison. As
Music Bausiness Worldwide report it, Smith initially pleaded not guilty
in front of the judge in September twenty twenty and
was released on a half million dollars bail. And by
the way, if any of those charges sound redundant, wire fraud,
wire fraud conspiracy, money laundering conspiracy. You know when they
when they charge you with these things, they they try
to charge you with everything they possibly can, right, so
that see what can stick? See what can stick? Or
if there ends up in.
Speaker 2: Charge per instance, So if there's one instance and then
there's another instance, then that's two charges.
Speaker 1: And if there ends up being an opportunity for some
sort of a plea deal, you don't want to, you know,
if you're the prosecutors you want to be able to
negotiate from you know, you want to have as many
things on the table as possible, right, So you know,
if you in other words, if if the uh, if
the defense wants to plead something down, well you got
to have as many things available to plead down from. Right.
Speaker 2: Yep.
Speaker 1: So it says today's guilty plea to a single conspiracy
count carrying a max. So they did. They did a
plead down carrying a maximum of five years rather than
the combined sixty years he previously faced. Represents a significant
reduction in Smith's legal exposure. According to the charging documents
and statements made in court, Smith created thousands of bought
accounts on streaming platforms including Amazon Music, Apple Music, Spotify,
and YouTube Music, and used software to cause those accounts
to continuously stream songs that he owned. Smith spread his
automated streams across thousands of songs to avoid triggering the
platform's anti fraud detection systems. To obtain the volume of
tracks needed for the scheme to work, Smith turned to AI,
using it to generate hundreds of thousands of songs. Those
songs were streamed by his bought accounts billions of times
allowing him to fraudulently collect more than eight million dollars
in royalties at the peak of his operation. According to
the Department of Justice, Smith estimated that his bots could
generate approximately six hundred sixty one thousand, four hundred and
forty streams per day, yielding annual royalties of over one
point two million. The Mechanical Licensing Collective the MLC, which
distributes mechanical royalties from streaming in the US, played a
key role in identifying the fraud scheme. In a statement
following today's guilty plea, the MLC said, quote, Today's news
highlights the serious threat that streaming fraud poses to the
music industry and the important role the MLC plays and
confronting it. We appreciate the Department of Justice's swift action,
recognizing that the MLC identified the fraud early, challenged Smith
and his representatives, and prevented the diversion of mechanical royalties
away from rightful songwriters. The MLC will continue to invest
in anomaly detection and fraud prevention to protect our members,
and we will continue to collaborate with other industry organizations
and law enforcement to protect all songwriting royalties unquote. The
MLC had previously raised concerns about Smith's catalog, questioning how
he could produce such a high volume of music so quickly.
Smith and his representatives denied at the time that his
works were AI generated.
Speaker 2: Well, of course, he's trying to game the system, and
he did. His problem was he was too greedy. He
didn't quit while it was his head. Now he's in jail.
Speaker 1: Yeah, well that's what happens. I mean true, you know,
that's that's how people get caught. They get greedy.
Speaker 2: Yep, you know, thousands of songs though. Wow, Yeah, he
definitely was was determined.
Speaker 1: Yeah, but it is.
Speaker 2: Crappy if that's happened. With that happening, that it does
rip off for a artist, because you know, all he's
doing is just game in the system with these bots
that are playing the song. It's not human. Nobody's hearing
it for real, it's just a computer program playing repeat.
Speaker 1: But also in doing that, you know everything that you
do online leaves a digital footprint. It's it's like he
had to know on some level eventually he was going
to get caught unless he was just so blinded by
his screen. That's something I'm always fascinated by when when
I see stories like this is the psychology of it
is very interesting to me because they must know on
some level, whether they're admitting the admitting it to themselves
or not. Maybe it's subconscious, but they must know they're
going to get caught because everything that you do online,
you know, it's.
Speaker 2: Like a bag. I think they think they're not going
to get caught. Maybe they're going to get away with
it because they figured something new out, or maybe they
figured out how to use the computer a different way.
Speaker 1: Bank robberies always make me think about this too, Like
whenever I see a.
Speaker 2: Story, ever hear one getting away.
Speaker 1: Well, that's the thing, whenever I see a story about
a bank robbery, it's always to me, it's always like
people still even attempt to rob banks. There's there's no
chance you're gonna get away with it.
Speaker 2: When's the last time we heard of somebody actually getting
away with it?
Speaker 1: It doesn't happen exactly. I mean, Bonnie and Clyde didn't
get away with it in the year you know, twenty
twenty six. With all the technology that we have, nobody's
getting away with that. But where people still try, like
somebody will still walk into a bank and just hand
the teller a note and think that they're gonna that
they're gonna get away with it.
Speaker 2: Why do you think there's so many Karen videos? What
do you mean there's so many videos of people doing
bad behaviors? Oh yeah, because people too bad behaviors fite
the fact that you should be smart enough to know
there's a camera everywhere.
Speaker 1: Well yeah, but I'm talking. I'm talking specifically about crime
and just the things that people think they're going to
get away with or you know.
Speaker 2: Same category in my book, or the or the cut.
Speaker 1: Well, you know, we open.
Speaker 2: The think they're gonna get away with it.
Speaker 1: Look what we opened the show with the cops rated
Afroman's home. Yep, they didn't get away with it. There
were cameras all throughout get away. Thought they were going
to get away with that.
Speaker 2: Yeah, Then when they realized there were cameras, they cut
the cameras. But now it was too late.
Speaker 1: Yep.
Speaker 2: Yeah, and that just made them look all the more guilty.
Speaker 1: The other question this raises in my mind is how
many other people are doing this? You just haven't been caught.
Speaker 2: There's gonna be some kind of a program that allows
people to create these bought accounts as well. Yeah, because
on the other side is seeing that as a human.
Speaker 1: Yeah, well, this guy was obviously very very smart. I mean,
he's probably got a genius till now. Yeah, but he's
probably well, I mean, his judgment is one thing, but
in terms of being able to pull this off, and
he's probably got a genius level IQ to be able
to figure out how to do all that and then
get away with it for as long as he did.
Speaker 2: Create a thousands of Like, how do you create that
many songs? How do you create that many accounts?
Speaker 1: Right?
Speaker 2: I can't imagine how many bought accounts he had, right
to get them to play enough to get him that
kind of money?
Speaker 1: Yeah, what was it?
Speaker 2: A mill a month or something like that?
Speaker 1: No, one year?
Speaker 2: Oh, a year?
Speaker 1: So he did this over the course of years.
Speaker 2: Be like, you got a million, go away right, right?
Speaker 1: Yeah, you do it for a year and then you
get out. Yeah, take a million and go comfortably, take
a million, invest it, and you know, live.
Speaker 2: Comfortably for the rest of your life. But not not
not greed, grotesque greed. Ah, yes, do we not talk
about that all the time.
Speaker 1: I don't want to give anybody the wrong idea though.
We're not suggesting that it would have been okay if
he had just done this for a year. And you know, no,
we're not. We're not condoning it. No, we're not condoning crime.
I mean, this is criminal activity, and it stinks.
Speaker 2: Because it takes a lot of attention away from real artists.
And plus those illicit plays are going to show up.
They're gonna try and make those songs go viral by
their plays. Yeah, so it messes up a lot for
a lot of real people and real artists.
Speaker 1: Yeah, so that's stinky. Absolutely, it was a little bit
more to this. The case was prosecuted by the Complex
Fraud and Cyber Crime Unit of the US Attorney's Office
for the SDN Y. Assistant US attorneys Nicholas Chucciello and
Kevin Mead led the prosecution. The original indictment named unnamed.
Oh this is interesting, named unnamed co conspirators, including the
CEO of an AI music company and a music promoter
who helped Smith produce the AI generated tracks. The legal
status their legal status has not yet been publicly disclosed.
Speaker 2: Oh.
Speaker 1: Because one of the things he was originally charged with
was conspiracy. Smith's case.
Speaker 2: The p that there are other people involved.
Speaker 1: Yeah.
Speaker 2: Yeah.
Speaker 1: His case is the highest profile criminal prosecution for streaming
fraud globally, but it's not the only one. In Denmark,
a man was sentenced to eighteen months in prison in
March twenty twenty four after being found guilty of data
fraud and copyright infringement for using bots to inflate the
stream count on six hundred and eighty nine tracks uploaded
to platforms including Apple Music, Spotify, and U See Music.
That sentence was subsequently increased by to twenty four months
by the Western High Court of Denmark in February of
twenty five after judges found evidence of more extensive fraudow
than initially proven. So apparently in their system in Denmark
you can.
Speaker 2: Double JEOPARDI they could just up your up your sentence. Wow.
Speaker 1: I think they can do that in the US too.
It just doesn't happen for your sentence. I feel like
I feel like there was a weird case charged you
with something. There was something in the United States where
something like that was done, and I think that this
was a while ago. I'll have to look it up.
I think there's something like that was done where a judge,
a higher court judge overruled somebody else's Oh you know
what I think it was. So a judge had reduced
somebody's sentence, and then another judge overturned the reduction and
restored the original sentence. It was something weird, and it
was it was something no, not exactly but well it
did effectively add or time. But there was something weird
like that that happened in the US that made people
really upset. Because it's in theory, so that's not supposed
to happen.
Speaker 2: But