Photo Credit: Jesús Rocha
The musician indicted by the US government for his alleged role in the $10 million streaming fraud scam pleads not guilty as the case kicks off.
Michael Smith, the 52-year-old North Carolina musician who is being charged with three felony counts in connection with a $10 million streaming fraud scam, entered a plea of ‘not guilty’ during a brief proceeding. As initially reported by Law 360, US District Judge John Koeltl issued an order in Manhattan setting Smith’s bail at $500,000 as the case moves forward.
Earlier this month, the US government indicted Smith for his alleged role in the “scheme to create hundreds of thousands of songs with artificial intelligence and use automated programs called ‘bots’ to stream the AI-generated songs billions of times.”
The recently unsealed indictment alleged Smith went through a number of steps and processes to artificially boost streams, including fake email accounts and cloud service accounts, as well as paying for family plans on various streaming platforms. Smith estimated at one point he could use bots to generate around 661,440 streams per day, generating annual royalties of about $1,207,128.
Spotify issued a statement just last week, going on record to say that its platform only accounted for less than 1% of the money generated in the streaming fraud scheme. The company said it “invests heavily in automated and manual reviews to prevent, detect, and mitigate the impact of artificial streaming” on its platform.
“It appears our preventative measures worked and limited the royalties Smith was able to generate from Spotify to approximately $60,000 of the $10 million noted in the indictment,” said Spotify. “As [Spotify] typically accounts for around 50% of streamshare, this shows how effective we are at limiting the impact of artificial streaming on our platform.”
According to the indictment, one unnamed streaming service was able to detect the alleged fraudulent activity, cutting Smith off from royalty payments as early as 2019. Though the indictment referred to that service as only “Streaming Platform-1,” news outlets have since identified the platform to be Spotify.
Meanwhile, the Mechanical Licensing Collective also identified issues with Smith’s streaming data and withheld the royalty payments associated with them. The timing was apt; the MLC had recently announced a collaboration with music streaming fraud detection platform Beatdapp to enhance the collective’s existing fraud detection capabilities.
Beatdapp, who also began a partnership with Universal Music Group in January, said earlier this summer that streaming fraud accounts for around $2 billion lost royalties for artists each year.
