A musician indicted by\u00a0the US Government earlier this month over an alleged $10 million streaming fraud scam has pled not guilty.<\/p>\n
As reported<\/a> by Law360, Michael Smith<\/b>, a 52-year-old resident of North Carolina, entered his plea in front of U.S. District Judge John Koeltl<\/strong> in Manhattan on Thursday “during a brief proceeding”.<\/p>\n According to court documents viewed by MBW, Judge John Koeltl issued an order on Thursday (September 18) setting Smith’s bail <\/a>at $500,000.<\/strong><\/p>\n As\u00a0MBW<\/em>\u00a0reported earlier this month<\/a>, the US Government charged Smith with three felony counts in connection with a \u201cscheme to create hundreds of thousands of songs with artificial intelligence and use automated programs called \u2018bots\u2019 to stream the AI-generated songs billions of times\u201d.<\/p>\n Smith is alleged to have fraudulently generated over $10 million<\/strong> in royalties through the scheme between 2017 and 2024.<\/p>\n He faces charges of wire fraud, wire fraud conspiracy <\/strong>and money laundering conspiracy<\/strong>, each of which carries a maximum of 20 years in prison.<\/p>\n The indictment<\/a>, which was unsealed earlier this month, alleged that Smith used a number of measures to artificially boost streams, including fake email accounts and cloud services, and paying for Family plans on various streaming platforms.<\/p>\n At one point, according to the DOJ’s announcement<\/a>, Smith estimated that he could use bots to generate about 661,440<\/b>\u00a0streams per day, generating annual royalties of\u00a0$1,207,128.<\/b><\/p>\n Last week, Spotify\u00a0<\/a>went on the record<\/a> to say that its platform accounted for less than 1%<\/strong> of the $10 million<\/strong> generated in the landmark streaming fraud case.<\/p>\n \u201cSpotify invests heavily in automated and manual reviews to prevent, detect, and mitigate the impact of artificial streaming on our platform,\u201d a Spotify spokesperson told\u00a0MBW<\/em>\u00a0in an email.<\/p>\n \u201cIn this case, it appears that our preventative measures worked and limited the royalties [Michael] Smith was able to generate from Spotify to approximately\u00a0$60,000<\/strong>\u00a0of the\u00a0$10,000,000<\/strong>\u00a0noted in the indictment.<\/p>\n “As Spotify typically accounts for around 50%<\/strong>\u00a0of streamshare, this shows how effective we are at limiting the impact of artificial streaming on our platform.\u201d<\/p>\n The indictment against Smith described one unnamed streaming service that was able to detect Smith\u2019s alleged fraudulent streaming activities and cut him off from payments as early as 2019.<\/p>\n That streaming service –\u00a0 referred to as \u201cStreaming Platform-1\u201d in the indictment \u2013 has been identified by news outlets <\/a>as Spotify, based on the wording of its terms of service as quoted in the indictment.<\/p>\n \u201cIn or about March 2019, Streaming Platform-I informed a music distribution company (“Distribution Company-3”) that Michael Smith, the defendant, was working with, that Streaming Platform-I believed Smith had engaged in streaming fraud,\u201d the indictment states.<\/p>\n \u201cShortly thereafter, [Smith] communicated directly with Streaming Platform-I to deny that he was engaged in streaming fraud and demand that Streaming Platform-I reinstate his music.\u201d<\/p>\n “The FBI remains dedicated to plucking out those who manipulate advanced technology to receive illicit profits and infringe on the genuine artistic talent of others.\u201d<\/p>\n Christie M. Curtis, FBI Acting Assistant Director, speaking earlier this month<\/span><\/p><\/blockquote>\n Tackling streaming fraud continues to be a key objective for the wider music business.<\/p>\n In Q1 2024, Spotify introduced a suite of new changes<\/a> to its royalty model, one of which was a policy to financial penalize labels<\/strong>\u00a0and\u00a0distributors<\/strong>\u00a0per track when \u201cflagrant<\/strong>\u00a0artificial<\/strong>\u00a0streaming<\/strong>\u201d is detected on their content, which the company said would act as a \u201cdeterrent<\/strong>\u201d against artificial streaming.<\/p>\n As reported<\/a> earlier this month, The\u00a0Mechanical Licensing Collective <\/b>identified irregularities in Smith\u2019s streaming data and withheld the associated royalty payments. The development arrived a month after The MLC announced a collaboration<\/a>\u00a0with music streaming fraud detection company\u00a0Beatdapp<\/b> to \u201ccomplement and enhance\u201d the MLC\u2019s existing streaming fraud detection capabilities. (Beatdapp also struck a strategic partnership<\/a> with\u00a0Universal Music Group\u00a0in January.)<\/p>\n Beatdapp said in July that streaming fraud takes around $2 billion<\/b><\/a> out of artists\u2019 royalties per year.<\/p>\n Elsewhere, in June last year, France-born music streaming service\u00a0Deezer<\/span><\/a>\u00a0set out a strategy to address fraudulent streaming activity on its platform.<\/p>\n Also in June last year, a number of music companies, ranging from distributors to other streaming platforms like Spotify and Amazon Music formed<\/a> what they called \u201can unprecedented alliance\u201d to launch \u2018Music Fights Fraud\u2019, a global task force \u201caimed at eradicating streaming fraud\u201d.<\/p>\n The legal action brought by the US government against Michael Smith is the latest high-profile streaming fraud case to make headlines globally.<\/p>\n
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