Feds Seek Nearly 4 Years in Prison for AI Music Fraudster Accused of Stealing Millions

KUALA LUMPUR, 30 SEPTEMBER 2026 —

Federal Prosecutors Seek Nearly Four Years in Prison for AI Music Fraudster Who Siphoned Millions from Artists’ Royalties

U.S. prosecutors have urged a Manhattan federal judge to impose a 46-month prison sentence on Michael Smith, a North Carolina man convicted of orchestrating a sophisticated AI-driven music fraud scheme that artificially inflated streams on major platforms and diverted millions in royalties from legitimate artists. Smith’s sentencing hearing is scheduled for October 6, with federal probation officials recommending a shorter 24-month term, while his defense team has argued for probation alone.

The case marks one of the most brazen examples of how artificial intelligence and automated streaming manipulation can exploit loopholes in digital royalty systems, raising concerns about the vulnerability of creative industries to large-scale financial fraud. Prosecutors described Smith’s operation as a "massive fraud" that not only deprived artists of earnings but also distorted the very metrics used to measure success in the music industry.

With the sentencing decision looming, the outcome could set a precedent for how courts handle emerging forms of digital fraud in an era where AI-generated content is increasingly blurring the lines between innovation and exploitation.

Smith, who pleaded guilty in March to one count of conspiracy to commit wire fraud—a charge carrying a maximum five-year prison term—admitted to using AI to create thousands of fake songs under invented artist names. He then deployed an army of bot accounts to stream these tracks billions of times across platforms including Apple Music, Spotify, Amazon Music, and YouTube Music.

According to prosecutors, his scheme was so effective that his share of subscription-funded royalty pools occasionally surpassed those of established superstars. For instance, in April 2023, while Taylor Swift’s entire catalog generated 9.3 million streams from YouTube Music family-plan subscribers, Smith’s fake catalog amassed 80.9 million streams in the same period.

Prosecutors emphasized that Smith’s actions were not merely a technical oversight but a deliberate and prolonged fraud. In a filing dated September 30, Assistant U.S. Attorneys Nicholas W. Chiuchiolo and Kevin B. Mead argued that imposing a substantial prison term was necessary to "send a clear message" that such fraud would not go unpunished. They warned that a lenient sentence could undermine deterrence efforts, particularly as streaming fraud becomes more prevalent.

"If the public is watching this case, as the defendant claims, a lenient sentence will send precisely the wrong message: streaming fraud will not result in meaningful punishment," they wrote.

Smith’s defense, however, has framed his actions as a case of misguided ambition rather than criminal intent. In court filings last week, his lawyers, Noell P. Tin and Justine Harris, stated that their client was "profoundly sorry" for his conduct but maintained that he had initially believed his operations were lawful.

They cited consultations with a "well-known music attorney" experienced in music publishing, suggesting that Smith’s early efforts were rooted in a misunderstanding of legal boundaries. "Although he ultimately ended up rationalizing conduct that he knew was wrong—false statements to distributors and increasingly deceptive conduct to avoid scrutiny—his conduct began at a time when the legal parameters were unsettled," the defense argued.

Prosecutors rejected this defense, asserting in their filing that Smith’s "own words and conduct reveal that he knew from the very beginning that his scheme was a form of fraud." They pointed to his six-year involvement in the scheme, during which he allegedly carried out the fraud on a daily basis. U.S.

Attorney Jay Clayton had previously described Smith’s operation as "brazen," noting that while the songs and listeners were fake, the financial damage was very real. "Millions of dollars in royalties that Smith diverted from real, deserving artists and rights holders," Clayton said in March. "Smith’s scheme is over, as he stands convicted of a federal crime for his AI-assisted fraud."

The financial scale of the fraud is staggering. Prosecutors allege Smith pocketed over $8 million in unearned royalties, a sum he agreed to forfeit as part of his plea deal. The case also highlights the broader challenges facing the music industry, where AI-generated content and automated streaming manipulation threaten to distort revenue streams that support artists, composers, and rights holders.

Industry observers have noted that while AI tools can be used creatively, they also create opportunities for abuse, particularly when combined with bot-driven inflation tactics.

For Malaysia and the broader Southeast Asian region, where digital music consumption is growing rapidly but regulatory frameworks are still evolving, the Smith case serves as a cautionary tale. Local artists and rights management organizations in countries like Malaysia, Indonesia, and Thailand have increasingly reported issues with fraudulent streams and royalty discrepancies, often exacerbated by the lack of robust oversight on global platforms.

The outcome of Smith’s sentencing could influence how authorities in Asia-Pacific regions approach similar cases, particularly as AI adoption accelerates in content creation and distribution.

The sentencing hearing on October 6 will be closely watched by legal experts, industry stakeholders, and policymakers. If the judge sides with prosecutors and imposes a 46-month sentence, it would signal a firm stance against digital fraud in the creative industries. Conversely, a lighter sentence could embolden others to exploit similar loopholes, particularly as AI tools become more accessible.

For now, the case remains a stark reminder of the need for stronger safeguards in an industry where technology is reshaping both opportunity and risk.