Invest2 publishersIndependently confirmed3 min readPublished
Michael Smith gets 18 months in the first US criminal case over AI bot streaming fraud
Michael Smith got 18 months in prison for collecting more than $8 million in royalties with bots and AI songs, in the first US criminal case of its kind. Prosecutors wanted at least 46 months, so the deterrent the music trade groups asked for comes in at well under half that length.
The Investor · Invest desk
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What happened
- Judge John G. Koeltl also ordered Smith to forfeit $8,091,843.64, the loss figure both prosecutors and the defense agreed on.
- The US Probation Office had recommended 24 months, while Smith's lawyers asked for probation with no prison time at all.
- Smith argued that a music industry lawyer had told him his conduct would at worst bring civil penalties, a claim prosecutors disputed.
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Why it matters
- cost Because royalties are split pro rata from one pool, every fake stream shrank the payout to artists and songwriters whose songs real listeners played.
- precedent The next defendant's lawyers can cite a first sentence set at 39% of the guideline floor when they negotiate a plea.
- constraint Song-level anomaly checks are weak against a fraudster who can generate hundreds of thousands of tracks and spread streams thin across them, as Smith did.
- exposure The dispute over Smith's lawyer, who prosecutors say vouched for his catalogue to The MLC, brings the advisers around a fraud within reach of the same scrutiny.
Judge Koeltl imposed 18 months [2] against a federal guideline range of 46 to 57 [13]. That is 39% of the prosecutors' floor [22] and 75% of the 24 months the Probation Office recommended [14][23]. The money was settled by agreement. The $8,091,843.64 forfeiture is the loss figure both sides accepted [1].
For anyone pricing the next scheme, the forfeiture takes the gain to zero. What remains is 18 months inside plus two years of supervised release [5], multiplied by the odds of being caught at all. Smith's scheme ran from 2017 to 2024 [7], and he pleaded guilty in March 2026 [4].
The money came out of other artists' pay. In the Justice Department's description, royalties are paid proportionately from a pool of funds, so fake streams divert money from musicians whose songs real listeners played [6]. Prosecutors say Smith's hundreds of thousands of AI-generated songs were streamed billions of times [10]. Billions of streams against $8.09 million [1] works out to no more than about 0.4 cents a stream [21].
At that rate the fraud needs volume, and volume on one track gets noticed. Smith spread his streams across thousands of songs to avoid anomalous streaming on any single one [8]. He ran as many as 10,000 bot accounts at once, opened with fake email accounts and fraudulently obtained debit cards [7]. In an email he wrote that he needed "a TON of songs fast" to get around the platforms' "anti fraud policies" [9]. In April 2023 his bots logged 80.9 million family-plan streams on YouTube Music, 8.7 times the 9.3 million that Taylor Swift's entire catalogue drew there that month [11][20].
US Attorney Jamie McDonald said Smith "robbed millions in royalty payments from genuine artists and their fans" [12]. The sentencing announcements do not say whether any of the forfeited money will reach them.
The deterrent can still erode. The 18 months may become the anchor for the next defendant's plea. The US Attorney's Office argued against that outcome in its sentencing letter, writing that "a lenient sentence will send precisely the wrong message: streaming fraud will not result in meaningful punishment" [19]. Prosecutions may also stay rare. IFPI said the result "sends a clear message that streaming fraud is a crime and has serious consequences," while adding that "enforcement is only one part of tackling streaming fraud" and pointing to the industry's Streaming Integrity Initiative [16][17].
Or the case reaches the people around the fraud. Smith argued that a music industry lawyer told him his conduct would at worst bring civil penalties [24]. Prosecutors say they believe the same lawyer emailed The MLC in March 2023 insisting none of Smith's works were computer-generated [25]. The defense letter says a witness confirmed the lawyer "100% knew that Smith was manipulating streams" [26].
I think the case does make streaming fraud a prison risk as well as a takedown problem, because the whole gain is clawed back and a custodial term is added to it. The Music Fights Fraud Alliance wrote to the court that the sentence would "serve as the first real signal to the public regarding the actual legal consequences of streaming fraud" [18]. The counter-case is that the signal arrived at well under half the guideline floor, years after the conduct began [22][7]. This view is wrong if no second federal case follows, or if the next defendant gets the probation Smith's lawyers asked for [14].
What to watch
- Whether the government routes any of the $8,091,843.64 forfeiture back to the artists and songwriters whose pool share the bot streams diluted.
- Whether prosecutors act on the lawyer whom a defense witness says '100% knew' Smith was manipulating streams.
- Whether the Streaming Integrity Initiative publishes detection figures showing what platforms now catch before royalties are paid.