His lawyers call the damage “a drop in an ocean.” Prosecutors say all $8 million went into one pocket. A Manhattan judge decides Oct. 6.
For more than six years, according to federal prosecutors, Michael Smith fed AI-generated songs to an army of bots. On Tuesday, he finds out what that will cost him.
U.S. District Judge John G. Koeltl is scheduled to sentence the North Carolina man in Manhattan federal court on Oct. 6, the first sentencing in a U.S. criminal case over streaming fraud. Smith pleaded guilty in March to one count of conspiracy to commit wire fraud, which carries up to five years in prison. Under his plea deal he agreed to forfeit $8,091,843.64, the loss figure both sides accepted.
The scheme, as laid out in a sentencing letter the U.S. Attorney’s Office for the Southern District of New York filed on Sept. 29, ran almost like a factory. At its peak, Smith operated as many as 10,000 bot accounts, most of them on family plans, the cheapest way to keep that many logins alive, and registered largely with email addresses bought in bulk. To stay under fraud-detection radar, he spread the plays thinly across hundreds of thousands of songs, a catalog only AI could produce at that scale. In April 2023, prosecutors said, his tracks drew nearly nine times as many YouTube Music family-plan streams as Taylor Swift’s entire catalog. In total, royalty payers sent him more than $14 million.
Smith’s lawyers are asking for probation. In a sentencing memo filed Sept. 22 and first reported by Billboard, they argued that because the money came out of a royalty pool shared by millions of rightsholders, no individual artist suffered a loss anyone could notice. Each fake stream, they wrote, was “a drop in an ocean.” They also pointed to his clean record, letters from supporters and the toll prison would take on his family.
Prosecutors turned that argument around. The victims may be scattered, they told the court, but the proceeds were not: “Every penny of loss was diverted to the defendant.” They also rejected Smith’s claim that he was only copying what major labels did, noting that Spotify had banned automated plays in 2017, the year his scheme began.
Both sides agree the federal guidelines range is 46 to 57 months. The U.S. Probation Office recommended 24. The government wants at least 46.
The case matters to the business because of how streaming pays. Royalties come out of a fixed pot, so every fraudulent play shaves a fraction off every legitimate check. In a letter cited by prosecutors, the Music Fights Fraud Alliance told the court that the sentence will be the first real public signal of what streaming fraud costs in the United States. The nearest precedent is in Denmark, where an appeals court in 2025 raised a sentence for inflating streams on 689 tracks from 18 months to 24.
Distributors, platforms and anyone tempted to try the same thing will be reading Koeltl’s decision closely.
Sources: Music Business Worldwide, Sept. 25 · Music Business Worldwide, Sept. 30 · Billboard
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