Michael Smith's $8M AI Streaming Fraud: Sentencing Day

Michael Smith never needed a hit. He needed volume, patience and a spreadsheet. Over roughly seven years, the North Carolina man uploaded a catalog of AI-generated songs to the biggest streaming services, then used thousands of bot accounts to play each track a couple of times a day, every day, so no single song looked suspicious. The royalties came to more than $8 million. On Tuesday, October 6, 2026, Smith is due to be sentenced in Manhattan federal court in what is widely described as the first US criminal prosecution of streaming fraud.

Note on timing: this piece was written before the sentence was handed down, so it covers what the court has in front of it, not the outcome. We will update it once the sentence is public.

What Smith actually did

According to the charging documents and the reporting built on them, Smith ran the scheme from 2017 to 2024, targeting Spotify, Apple Music, Amazon Music and YouTube Music. He was arrested in September 2024 and charged with wire fraud, wire fraud conspiracy and money laundering conspiracy, each carrying a 20-year maximum. In March 2026 he pleaded guilty to a single count of conspiracy to commit wire fraud, which carries a five-year maximum, and agreed to forfeit $8,091,843.64, as Music Business Worldwide reported at the time of the plea. The case sits before US District Judge John G. Koeltl of the Southern District of New York.

US Attorney Jay Clayton put the case in one line when the plea was entered: "Smith generated thousands of fake songs using AI and streamed them billions of times. Although fake, the millions stolen were real." The Mechanical Licensing Collective flagged the catalog early and challenged its legitimacy, and reporting on the case refers to an unnamed CEO of an AI music company and a music promoter who helped produce the tracks. Their legal status has not been disclosed.

The math that made it work

The most useful reading of the case is not the headline total but the arithmetic behind it. Music Business Worldwide's pro-rata breakdown lays out how the operation was tuned to stay invisible. An early configuration used 52 cloud accounts running 20 bots each, or 1,040 bot accounts, each generating about 636 streams a day. That is roughly 661,440 streams a day spread across a huge catalog, which works out to about two plays per song per day. Smith understood why that mattered. In a message quoted in the reporting, he wrote: "If we get too many streams on one song it comes down."

His early projection assumed half a cent per stream. At that rate the fleet earned about $3,307 a day, $99,216 a month and just over $1.2 million a year. At peak the operation reportedly ran up to 10,000 bot accounts at once.

The reason this hurts people who never heard of Smith is how streaming pays. Services do not pay a fixed rate per play. They pool subscriber revenue each month and divide it pro rata by share of total streams. Every fake stream adds to the denominator, so the slice left for everyone else shrinks by a tiny amount. Nobody sees a line item that says "stolen by a bot." They just see a statement that is slightly smaller than it should have been.

That is also why the fix is structural. In April 2024 Spotify introduced a minimum of 1,000 streams per track over 12 months before a track earns recording royalties. Under Smith's early model, with about half his streams on Spotify, each song would have landed near 400 annual streams there, below the line. Dispersal, the thing that kept him hidden, would have become the thing that kept him from being paid.

What each side is asking the judge for

Federal sentencing guidelines put the range at 46 to 57 months. The calculation starts from a base offense level of 6, adds 18 levels for a loss between $3.5 million and $9.5 million and 2 more for sophisticated means, landing at level 23. Prosecutors are asking for "a substantial custodial sentence of at least 46 months." The probation office recommended 24 months. Smith's lawyers want probation with no prison time at all.

The defense filing, made on September 22, leans on a single argument that Music Business Worldwide quoted in full: "No individual artist or songwriter suffered any perceptible harm from Mr. Smith's conduct." It describes the impact on any one creator as "a drop in an ocean," points to his lack of a prior record, and adds that "while he made serious mistakes here, those mistakes do not define him as a person."

The industry answered in writing. The Music Fights Fraud Alliance, a grouping of distributors, collecting societies and streaming services, urged the court to impose a sentence "reflecting the unprecedented scope and systemic harm" of the scheme. Its letter, covered by Complete Music Update, argued that streaming fraud persists because of its ease and incentives, "coupled with a perceived lack of a legal risk." That perception is what the hearing is really about. The outcome matters less as punishment for one man than as a price tag on a crime that, until now, had almost never had one.

The sentencing was originally set for July 29 and has since moved to October 6.

Why this belongs on an underground music site

Dance music runs on small numbers. Independent labels, vinyl-first artists and small distributors live on fractions of a cent that add up slowly, and a pooled royalty system is exactly where a diffuse, low-volume attack does the most quiet damage. We have been following the same pressure from several sides: Spotify's new AI Persona badge and the IFPI's fraud pact, Deezer's finding that over half of its daily uploads are now AI, and Bandcamp's decision to ban AI music outright. The economics those pieces describe, covered in our look at how independent labels survive, are the ones a case like this tests.

The defense argument, that no one artist can point to a measurable loss, is also the strongest case for treating this as a systemic crime rather than a victimless one. If harm that small and that spread out can be shrugged off, the incentive to copy the method stays intact. If a court treats it as real theft from a shared pool, the calculation changes for the next person with a script and a cloud account.

Frequently Asked Questions

Who is Michael Smith and what did he do?

Michael Smith is a 54-year-old man from North Carolina who pleaded guilty to conspiracy to commit wire fraud for using AI-generated songs and thousands of bot accounts to inflate streams on Spotify, Apple Music, Amazon Music and YouTube Music. He collected more than $8 million in royalties between 2017 and 2024.

When is Michael Smith being sentenced?

Smith is scheduled to be sentenced on Tuesday, October 6, 2026, in federal court in Manhattan before Judge John G. Koeltl. The hearing was originally set for July 29.

How much prison time are prosecutors seeking?

Prosecutors are seeking at least 46 months. Federal guidelines recommend 46 to 57 months, the probation office recommended 24 months, and Smith's lawyers are asking for probation with no prison time. The offense carries a five-year maximum.

How did the bot scheme avoid detection?

Smith spread streams across a very large catalog so each song received only about two plays a day, and ran them through many bot accounts. In a message quoted in reporting on the case, he wrote that too many streams on one song would get it flagged.

Did any artist actually lose money?

The defense says no individual artist suffered perceptible harm. Industry groups disagree. Because streaming services divide a fixed pool of revenue pro rata, fake streams reduce the share paid to legitimate creators, though the loss to any one artist is small and hard to trace.

What has changed since the case began?

Spotify now requires a minimum of 1,000 streams per track over 12 months before it pays recording royalties, and industry groups such as the Music Fights Fraud Alliance are pressing courts for tougher deterrence. Streaming services have also started labeling or restricting AI-generated music, including Spotify's AI Persona badge.