Ahead of Michael Smith’s October 6th sentencing, the Music Fights Fraud Alliance (MFFA) has submitted a letter to the court arguing for a significant sentence to deter future abuse.
Michael Smith, who was convicted of stealing royalties from artists and songwriters with millions of bot-assisted streams on his AI-generated content, receives his sentencing in New York on October 6th. As the first criminal prosecution for streaming fraud in the U.S., the Music Fights Fraud Alliance (MFFA) submitted a letter to Judge John G. Koeltl arguing for a significant sentence to “signal to the public the actual legal consequences of streaming fraud.”
The MFFA shared its submissions to the court with Digital Music News early this morning.
MFFA members include Amazon Music, ASCAP, AudioSalad, Believe, CD Baby, DistroKid, Ditto, Downtown, EMPIRE, FaroLatino, FUGA, GYROGroup, ICE Services, Identity Music, LANDR, Limbo, Merlin, Meta, The MLC, MusicBiz, NueMeta, OneRPM, Qobuz, RandomSounds, Revelator, Roc Nation Distribution, Sentric, SOCAN, Songtrust, SonoSuite, SoundExchange, SoundCloud, Spotify, Symphonic, TooLost, TuneCore, UnitedMasters, and Vydia.
The Department of Justice referenced the MFFA’s points to push back on the defense’s claims that press coverage alone has already deterred future offenses.
The MFFA letter reaffirms that streaming fraud is not a victimless crime, making it clear that the more than $8 million in stolen royalties “came at the expense of the creators whose rightful royalties were siphoned away.”
MFFA is a nonprofit industry alliance whose member organizations include digital streaming platforms, music distributors, music publishers, record labels, performing rights organizations, and royalty collection societies. Founded in 2023 out of a recognition that the music industry needed to take a more proactive, collaborative approach to fraud detection, prevention, and mitigation, the MFFA has since grown to serve more than 40 stakeholders across the globe and represent a significant market share of the digital streaming economy.
“It is the MFFA’s belief that the sentence imposed should reflect the unprecedented scope and systemic harm of Mr. Smith’s fraud that targeted artists, songwriters, and the greater digital music ecosystem,” the letter states. “In addition to our mission to fight fraud, we are committed to ensuring that every dollar of streaming revenue reaches the creators who earned it.”
“Streaming fraud is not a victimless crime. The artists, songwriters, publishers, and rights holders whose legitimate streams were displaced by Mr. Smith’s scheme are the ones who bear the cost of his wire-fraud conspiracy. Fraudulently generated streams reduce the per-stream royalty rate for all legitimate creators because streaming royalties are drawn from a finite, shared royalty pool. Every fraudulent stream perpetrated by Mr. Smith diluted the value of every legitimate stream occurring during the same accounting period.”
“Since the start of Mr. Smith’s scheme, streaming fraud has considerably grown as a clear threat to the music industry. Stakeholders across the music supply chain—including MFFA member companies—are investing significantly in trust and safety resources, talent, and technologies,” the letter continues. “Yet despite these best preventative countermeasures, streaming fraud continues to persist due to its relative ease and inherent incentive structure, coupled with a perceived lack of a legal risk.”
“As a precedent-setting case, the sentence that this Court imposes will serve as the first real signal to the public regarding the actual legal consequences of streaming fraud. A clear precedent grounded in general deterrence is essential to deterring copycats and safeguarding the global creative community, while influencing how law enforcement, the courts, the music industry, and the broader public respond to streaming fraud in the years to come.”
“The prosecution of Mr. Smith has definitively shown that streaming fraud is a crime. It is our respectful hope that the court’s sentence will reinforce that reality, providing the general deterrence necessary to protect artists, songwriters, and the integrity of the digital music economy,” the MFFA letter concludes, signed by Michael Lewan, Executive Director of Music Fights Fraud Alliance.
The Mechanical Licensing Collective (MLC) doubled down on these points in documents submitted to the court. They point out that Smith also lied to the MLC after the collective halted his royalty payments and confronted him about his fraud.
“In response, Smith and representatives acting on his behalf repeatedly lied to the MLC in an attempt to obtain the royalty payments,” noting an email from one of Smith’s representatives that stated, “Mike categorically denies any play manipulation.”
An attorney working for Smith also denied on his behalf that any of his works were “computer-generated creations.”
In light of all the evidence and Smith’s conviction for wire fraud, the government “respectfully requests that the Court impose a substantial term of imprisonment of at least 46 months’ imprisonment,” in addition to forfeiting the $8 million-plus that was stolen in the scheme.
