North Carolina man gets 18 months in first federal AI music streaming fraud case

A North Carolina man who turned artificial intelligence and an army of fake listeners into a royalty machine is headed to federal prison. Michael Smith, 54, of Cornelius, was sentenced to 18 months on October 6, 2026, in Manhattan federal court.

The case has been described as the first federal criminal prosecution tied to AI-assisted music streaming fraud.

How the scheme worked

Smith used AI tools to produce hundreds of thousands of songs. He then played them to nobody in particular, over and over, through bot accounts.

Federal prosecutors said he used as many as 10,000 bot accounts to stream his catalog. Those accounts were built to inflate play counts across major services, including Spotify, Apple Music, Amazon Music and YouTube Music.

The operation ran from 2017 to 2024. Over that stretch, the fraud generated over $8 million in royalties.

In April 2023, Smith’s bot accounts produced 80.9 million streams on YouTube Music alone. For comparison, Taylor Swift’s catalog drew 9.3 million streams on the same platform that month.

The sentence and the forfeiture

US District Judge John G. Koeltl handed down 18 months in prison, followed by two years of supervised release. Smith also forfeited $8,091,843.64.

The prison term lands well below what the government wanted. Prosecutors had recommended 46 months, meaning the judge gave Smith less than half of that request.

Smith pleaded guilty on March 19, 2026, to conspiracy to commit wire fraud. That plea came after an earlier indictment in September 2024 that added more charges, including money laundering conspiracy.

What this means

For working musicians, the stakes are direct. Royalty pools are finite, so every fraudulent stream that gets paid is money that could have gone to a real artist with real listeners. Smith’s over $8 million did not appear from thin air.

For prosecutors, the outcome is mixed. They secured a guilty plea and full forfeiture of the proceeds. But the 18-month sentence, against a 46-month recommendation, signals that judges may not yet treat AI-enabled streaming fraud as harshly as the government would like.

For the AI industry, the case draws a line that is easy to miss. Using generative tools to make music was not the crime here. The fraud came from pairing that output with fake listeners to collect royalties that were never legitimately earned.

For now, the precedent is set. One man, hundreds of thousands of AI songs, as many as 10,000 bot accounts, and over $8 million in royalties ended with 18 months behind bars and every cent of the proceeds handed back.