Summary
On October 6, 2026, U.S. District Judge John G. Koeltl in Manhattan sentenced Michael Smith, a 54-year-old musician from Cornelius, North Carolina, to 18 months in prison for a scheme that used AI-generated songs and automated "bot" accounts to collect streaming royalties. Smith had pleaded guilty in March 2026 to one count of conspiracy to commit wire fraud; he was also sentenced to two years of supervised release and ordered to forfeit $8,091,843.64. The U.S. Attorney's Office for the Southern District of New York called it the Justice Department's first criminally charged case of AI-assisted music streaming fraud. Prosecutors had asked for at least 46 months, the bottom of the Sentencing Guidelines range, and the defense had asked for probation.
What Happened
Prosecutors unsealed a three-count indictment and arrested Smith on September 4, 2024, alleging that he had obtained more than $10 million in royalties. According to the charging release, Smith created thousands of accounts on Amazon Music, Apple Music, Spotify and YouTube Music and used software to make them stream songs he owned around the clock, spreading the streams across thousands of tracks so that no single song would look anomalous. In a December 26, 2018 email to two co-conspirators, he wrote: "We need to get a TON of songs fast to make this work around the anti-fraud policies these guys are all using now." The indictment said that around 2018 he began working with the chief executive of an AI music company and a music promoter, neither named in the release, to produce hundreds of thousands of AI-generated tracks.
On March 19, 2026, Smith pleaded guilty to a single count of conspiracy to commit wire fraud, which carries a maximum of five years, and agreed to forfeit $8,091,843.64. The government's sentencing letter of September 28 said Smith had obtained more than $14 million from royalty-paying entities in total, and that the agreed loss figure was reached by subtracting estimated royalties from legitimate streams and money he had paid back into the royalty pools by buying streaming subscriptions. The letter set his Guidelines range at 46 to 57 months and noted that the Probation Office had recommended 24 months. It said Smith had at times run as many as 10,000 bot accounts, and that in April 2023 his catalogue drew 80.9 million family-plan streams on YouTube Music against 9.3 million for Taylor Swift's entire catalogue. Prosecutors argued that a long sentence was needed for general deterrence because streaming fraud is hard to detect, and quoted a letter from the Mechanical Licensing Collective saying such fraud "redirects a portion of the existing royalty pool from every single legitimate rightsholder to fraudsters."
The defense replied on October 2 that "it is not inherently unlawful to use AI to create songs and place those songs on streaming platforms," citing Spotify's 2025 statement that royalty payments treat all music equally "regardless of the tools used to make it." It called it a "glaring unfairness" to use a novel prosecution of one person "as a vehicle to attempt to solve the ills of an industry." According to the court's minute entry, Koeltl imposed 18 months on the conspiracy count, ordered no restitution, set a surrender date of January 15, 2027, and dismissed the remaining counts on the government's motion.
The sentencing press release, issued under U.S. Attorney Jamie McDonald, used the term "super intelligence" where the office's 2024 and March 2026 releases had said "artificial intelligence," describing the case as the Justice Department's "First-Ever Criminally Charged Super-Intelligence Assisted Music Streaming Fraud," while still referring to Smith's "AI-generated songs."
Why It Matters
The case closed the first federal criminal prosecution in which generative AI was the means of producing the content used in a fraud on streaming platforms. The fraud charge concerned the fake streams used to collect royalties; the AI-generated songs were the means of spreading those streams across enough tracks to avoid detection, and the defense argued that making music with AI and uploading it is lawful. How platforms and royalty collectors treat AI-generated tracks therefore remains a matter of platform policy and the licensing settlements between labels and AI music companies, such as Universal Music Group's with Udio and Warner Music Group's with Suno.
The 18-month term was less than half the bottom of the Guidelines range and below the Probation Office's recommendation, after prosecutors had argued that only a substantial sentence would deter a crime that platforms struggle to detect. Whether it changes the economics of streaming fraud is not yet known. The public record also leaves open questions: the office's releases do not identify the AI music company executive and the promoter described in the indictment or say whether either was charged, and the gap between the $14 million Smith collected, the $10 million alleged in 2024, and the $8.1 million agreed loss reflects estimates in the presentence report that are not public.
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