Just two months ago, the major record labels in the music industry, such as Sony, Warner, and Universal, raised their voices against the growing threat that artificial intelligence poses to the world of music. The conflict centered on the services Suno AI and Udio, accused of causing damage to copyright holders. This case, which has just surfaced in the United States, reveals how music and AI still have a long way to go to reach an agreement.
The Michael Smith Fraud
Michael Smith, a 52-year-old music producer from Cornelius, North Carolina, went from being unknown to earning more than 10 million dollars in royalties from platforms like Spotify and Apple Music in a short period of time. However, after an FBI investigation, it was discovered that this rapid rise was the result of one of the biggest frauds to hit the music industry.
Smith used AI-generated songs and created thousands of fake accounts on streaming platforms. These accounts automatically played the generated music, reaching up to 661,440 streams per day, which allowed him to accumulate annual royalties of over one million dollars. Last Wednesday, the FBI arrested him on multiple charges, including money laundering and wire fraud. Smith now faces up to 60 years in prison.
How the Plan Worked
According to the indictment, Smith began his operation in 2017 by streaming his own music, but soon adapted his strategy to bypass the platforms' anti-fraud systems. In 2018, he decided to generate a large amount of AI-created music, complicating the streaming platforms' ability to detect fraud. Additionally, Smith purchased fake email addresses and used a VPN service to hide his activities.
This fraud impacted the royalty funds that streaming platforms set aside for artists, as explained by the prosecution in Manhattan federal court. The money that should have gone to musicians and composers ended up in Smith's hands, who had been exploiting the system for seven years.
A Growing Problem for the Music Industry
Smith’s case not only exposes the system’s vulnerability, but also highlights the risks that AI poses for the future of music. The industry, now predominantly digital, has yet to find an effective way to deal with the challenges presented by artificial intelligence. Although this fraud is one of the first of its kind, it is likely not to be the last.
The indictment also revealed that the CEO of an artificial intelligence company is under investigation for allegedly collaborating with Smith in this scheme, along with a music promoter. The increasing reliance on AI in music continues to raise many unanswered questions, and the industry must quickly adapt to prevent similar cases from happening again.
