First U.S. streaming fraud case ends with 18-month sentence over AI music bot scheme

A federal court in the Southern District of New York sentenced 54-year-old Michael Smith to 18 months in prison on Oct. 6, 2026, in what was described as the first criminal streaming fraud case in the United States. Smith, a North Carolina resident, was also ordered to forfeit $8,091,843.64. Prosecutors said Smith used thousands of bot accounts to repeatedly stream songs registered under his name and collect royalties. The operation relied on a huge catalog of AI-generated tracks, with court filings saying he obtained hundreds of thousands of songs starting around 2018. At its peak, the scheme involved 10,000 active bot accounts, many tied to family-plan subscriptions because they offered the lowest average cost per account. The case turned on how streaming royalty pools work. Platforms place part of their revenue into a royalty pool, then distribute that money based on each track’s share of total plays. Prosecutors argued that fake streams did not take money from the platforms directly; they diluted the share paid to legitimate rights holders. The government said Smith received more than $14 million from royalty collection entities, while the agreed loss amount after offsets was $8,091,843.64. The report also cited platform enforcement pressure, Spotify’s royalty threshold rules, and a comparison showing that Smith’s catalog drew 80.9 million YouTube Music family-plan streams in April 2023, versus 9.3 million for Taylor Swift’s catalog in the same month.