{"id":2486,"date":"2024-09-04T20:17:55","date_gmt":"2024-09-04T20:17:55","guid":{"rendered":"https:\/\/usatrustedlawyers.com\/blog\/feds-accuse-man-of-10m-song-scam\/"},"modified":"2024-09-04T20:17:55","modified_gmt":"2024-09-04T20:17:55","slug":"feds-accuse-man-of-10m-song-scam","status":"publish","type":"post","link":"https:\/\/usatrustedlawyers.com\/blog\/feds-accuse-man-of-10m-song-scam\/","title":{"rendered":"Feds Accuse Man of $10M Song Scam"},"content":{"rendered":"\n
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\n\tA North Carolina musician has been indicted by federal prosecutors over allegations that he used AI to help create \u201chundreds of thousands\u201d of songs and then used the AI tracks to earn more than $10 million in fraudulent streaming royalty payments since 2017.<\/p>\n

\n\tIn a newly unsealed indictment, Manhattan federal prosecutors charged the musician, Michael Smith, 52, with three counts of wire fraud, wire fraud conspiracy and money laundering conspiracy. According to the indictment, Smith was aided by the CEO of an unnamed AI music company as well as other co-conspirators in the U.S. and around the world, and some of the millions he was paid were funneled back to the AI music company.<\/p>\n

\n\tAccording to the indictment, the hundreds of thousands of AI songs Smith allegedly helped create were available on music streaming platforms like Spotify, Amazon Music, Apple Music and YouTube Music. It also claims Smith has made \u201cfalse and misleading\u201d statements to the streaming platforms, as well as collection societies including the Mechanical Licensing Collective (the MLC) and distributors, to \u201cpromote and conceal\u201d his alleged fraud.<\/p>\n

\n\tBecause of Smith\u2019s alleged activities, he diverted over $1 million in streaming payments per year that \u201cultimately should have been paid to the songwriters and artists whose works were streamed legitimately by real consumers,\u201d says the indictment.<\/p>\n

\n\tThe indictment also details exactly how Smith allegedly pulled off the scheme he\u2019s accused of. First, it says he gathered thousands of email accounts, often in the names of fictitious identities, to create thousands of so-called \u201cbot accounts\u201d on the streaming platforms. At its peak, Smith\u2019s operation allegedly had \u201cas many as 10,000 active bot accounts\u201d running; he also allegedly hired a number of co-conspirators in the U.S. and abroad to do the data entry work of signing up those accounts. \u201cMake up names and addresses,\u201d reads an email from Smith to an alleged co-conspirator dated May 11, 2017, that was included in the indictment.<\/p>\n

\n\tTo maximize income, the indictment states that Smith often paid for \u201cfamily plans\u201d on streaming platforms \u201ctypically using proceeds generated by his fraudulent scheme\u201d because they are the \u201cmost economical way to purchase multiple accounts on streaming services.\u201d<\/p>\n

\n\tSmith then used cloud computing services and other means to cause the accounts to \u201ccontinuously stream songs that he owned\u201d and make it look legitimate. The indictment alleges that Smith knew he was in the wrong and used a number of methods to \u201cconceal his fraudulent scheme,\u201d ranging from fictitious email names and VPNs to instructing his co-conspirators to be \u201cundetectable\u201d in their efforts.<\/p>\n

\n\tIn emails sent in late 2018 and obtained by the government, Smith told co-conspirators to not be suspicious while running up tons of streams on the same song. \u201cWe need to get a TON of songs fast to make this work around the anti fraud policies these guys are all using now,\u201d Smith wrote in the emails.<\/p>\n

\n\tIndeed, there have been a number of measures taken up by the music business to try to curb this kind of fraudulent streaming activity in recent years. Anti-streaming fraud start-up Beatdapp, for example, has become an industry leader, hired by a number of top distributors, streaming services and labels to identify and prevent fraud. Additionally, severl independent DIY distributors including TuneCore, Distrokid and CD Baby have recently banded together to form \u201cMusic Fights Fraud,\u201d a coalition that shares a database and other resources to prevent fraudsters from hopping from service to service to avoid detection.<\/p>\n

\n\tLast year, Spotify and Deezer came out with revamped royalty systems that proposed new penalties for fraudulent activity. Still, it seems fraudsters study these new efforts and continue to evolve their efforts to evade detection.<\/p>\n

\n\tThe rise of quickly generated AI songs has been a major point of concern for streaming fraud experts because it allows bad actors to spread their false streaming activity over a larger number of songs and create more competition for streaming dollars. To date, AI songs are not paid out any differently from human-made songs on streaming platforms. A lawsuit filed by Sony Music, Warner Music Group and Universal Music Group against AI companies Suno and Udio in June summed up the industry\u2019s fears well, warning that AI songs from these companies \u201csaturate the market with machine-generated content that will directly compete with, cheapen and ultimately drown out the genuine sound recordings on which [the services were] built.\u201d<\/p>\n

\n\tThough Smith is said to be a musician himself with a small catalog of his own, the indictment states that he leaned on AI music to quickly amass a much larger catalog.<\/p>\n

\n\tThe indictment alleges that around 2018, \u201cSmith began working with the Chief Executive Officer of an unnamed AI music company and a music promoter to create thousands of thousands of songs that Smith could then fraudulently stream.\u201d Within months, the CEO of the AI company was allegedly providing Smith with \u201cthousands of songs each week.\u201d Eventually, Smith entered a \u201cMaster Services Agreement\u201d with the AI company that supplied Smith with 1,000-10,000 songs per month, agreeing that Smith would have \u201cfull ownership of the intellectual property rights in the songs.\u201d In turn, Smith would provide the AI company with metadata and the \u201cgreater of $2,000 or 15% of the streaming revenue\u201d he generated from the AI songs.<\/p>\n

\n\t\u201cKeep in mind what we\u2019re doing musically here\u2026 this is not \u2018music,\u2019 it\u2019s \u2018instant music\u2019 ;)\u201d, reads an email from the AI company\u2019s CEO to Smith that was included in the indictment.<\/p>\n

\n\tOver time, various players in the music business questioned Smith\u2019s activities, including a streaming platform, a music distributor and the MLC. By March and April 2023, the MLC halted royalty payments to Smith and confronted him about his possible fraud. In response, Smith and his representatives \u201crepeatedly lied\u201d about the supposed fraud and AI-generated creations, says the indictment.<\/p>\n

\n\tChristie M. Curtis<\/strong>, FBI acting assistant director, said of the indictment, \u201cThe defendant\u2019s alleged scheme played upon the integrity of the music industry by a concerted attempt to circumvent the streaming platforms\u2019 policies.\u00a0The FBI remains dedicated to plucking out those who manipulate advanced technology to receive illicit profits and infringe on the genuine artistic talent of others.\u201d<\/p>\n

\n\tKris Ahrend<\/strong>, CEO of the MLC, added, \u201cToday\u2019s DOJ indictment shines a light on the serious problem of streaming fraud for the music industry. As the DOJ recognized, The MLC identified and challenged the alleged misconduct, and withheld payment of the associated mechanical royalties, which further validates the importance of The MLC\u2019s ongoing efforts to combat fraud and protect songwriters.\u201d<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

A North Carolina musician has been indicted by federal prosecutors over allegations that he used AI to help create \u201chundreds of thousands\u201d of songs and then used the […]<\/p>\n","protected":false},"author":1,"featured_media":2487,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[2756,3282,1630,2556,2034,986],"class_list":["post-2486","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-lawyers","tag-10m","tag-accuse","tag-feds","tag-man","tag-scam","tag-song"],"_links":{"self":[{"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/posts\/2486","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/comments?post=2486"}],"version-history":[{"count":0,"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/posts\/2486\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/media\/2487"}],"wp:attachment":[{"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/media?parent=2486"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/categories?post=2486"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/tags?post=2486"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}