Judge Gives Smith 18 Months for Music Streaming Fraud

Michael Smith received an 18-month prison sentence on Oct. 6 for draining $8,091,843.64 from music royalty pools with bots and AI songs. He is the first person sentenced in a U.S. criminal case for streaming fraud. Judge John G. Koeltl also imposed two years of supervised release.

Koeltl went below the 46 months prosecutors wanted and the 24 months the probation office recommended. He ordered no restitution to the artists whose shares of those pools got smaller.

Koeltl Imposes 18 Months, Not the 46 Sought

Smith, 54, of Cornelius, North Carolina, stood in Manhattan federal court on Tuesday afternoon and nodded as the term landed. When Koeltl asked if he wished to speak after the sentence, Smith said, “Thank you for your consideration on everything, Your Honor.”

He had pleaded guilty to conspiracy to commit wire fraud on March 19, 2026, a count under 18 U.S.C. § 371 that carries a five-year maximum. The plea replaced a September 2024 indictment that had charged three counts. Assistant U.S. Attorneys Nicholas W. Chiuchiolo and Kevin B. Mead, of the Southern District’s Complex Frauds and Cybercrime Unit, asked for a term at the bottom of the 46-to-57-month guideline range.

THE TERMS PUT TO THE COURT

The parties had already agreed on the guidelines math: offense level 23 in Criminal History Category I, which produces that 46-to-57-month band. Koeltl called the range “somewhat inflated,” a line many judges use on loss-driven fraud tables, and then went six months under even the probation office.

Justine Harris, one of Smith’s lawyers, told the court her client had spent two years on pretrial release, had been arrested at home, and had watched his studio go into foreclosure. She said his wife Erica’s dance studio had seen attendance fall 30 percent, and that their six children, three of them biologically his, had been stigmatized. Harris asked for probation. Chiuchiolo said a platform flagged Smith for fraud in 2018 and he denied it, and that general deterrence in white-collar cases still runs through jail time.

I need to make amends. I betrayed the music community I care so much about. I love writing songs but I turned it into a perverse business model. I suspended my own sense of right and wrong.

Michael Smith, allocution, Oct. 6, 2026, Manhattan federal court

U.S. Attorney Jamie McDonald, announcing the term, said Smith had flooded platforms with automated bots in place of consumers and fake songs in place of creativity. Jay Clayton, who held the office when Smith pleaded, had put it more tightly in March: “Although the songs and listeners were fake, the millions of dollars Smith stole was real.”

The Royalty Pool Paid the Bots Anyway

Streaming services do not cut a check per play from a cash drawer. They set aside a share of revenue, then split that pool by stream share, so a fake play shrinks every real one in the same period. That is why the victims in this case are a crowd with no invoice. Sound-recording money moves from the services to labels and distributors. Publishing money moves to performing-rights groups and, for U.S. digital mechanicals, to the Mechanical Licensing Collective.

The government’s letter walks through Smith’s method as three repeating steps, which he ran from at least 2017 through 2024 on Amazon Music, Apple Music, Spotify, and YouTube Music.

HOW THE SCHEME WAS BUILT

• Fake accounts: Smith bought bulk email addresses in invented names, then paid workers here and abroad to open bot accounts, including family plans, and he lied to a Manhattan debit-card service that the names were company employees.
• Quiet catalog: Software on cloud machines kept those accounts playing songs he controlled, spread thin so no single track looked hot enough to pull down.
• Royalty collection: Distributors and the services paid him from the same pools that pay everyone else, until the agreed loss was fixed at $8,091,843.64.

He wrote the early model to himself. Fifty-two cloud accounts, each running 20 bots, gave him 1,040 bots. Each bot could play about 636 songs a day, a ceiling of 661,440 streams. At half a cent a play he projected $3,307.20 a day, $99,216 a month, and $1,207,128 a year. By June 2019 he was telling a partner they had 88 million streams and were earning about $110,000 a month.

Volume on one title would have killed it. On Oct. 4, 2018, he wrote that they needed “a TON of content with small amounts of Streams.” On May 9, 2019, he wrote, “If we get too many streams on one song it comes down.” Artificial intelligence supplied the catalog. Filings say he obtained hundreds of thousands of AI-generated tracks, enough to keep each title near noise. At points he had as many as 10,000 bot accounts running at once, a later fleet that dwarfs the 1,040-bot spreadsheet.

The songs did not need fans, and they did not need to be good. They needed to be numerous and dull enough that fraud filters looking at one title would see nothing worth a takedown.

80.9 Million Family-Plan Streams in One Month

The pattern showed up at the catalog level, which is where pro-rata fraud lives. In April 2023, prosecutors said, Taylor Swift’s entire catalog drew 9.3 million streams from YouTube Music family-plan accounts. Smith’s catalog drew 80.9 million from the same class of plans that month.

The Mechanical Licensing Collective saw the same shape on the publishing side. In March and April 2023 it halted his royalties and put to him that in October 2021 and October 2022, almost all of Smithhouse Music Publishing’s Amazon activity had come from family-plan accounts, a pattern it called statistically improbable. His lawyer answered that he used third-party promoters.

Distributors had been in his inbox years earlier. On March 6, 2018, a Manhattan distributor told him one of his songs fit the usual abuse criteria. Chiuchiolo told Koeltl that a platform flagged him that same year and he denied it. Each time, the filings say, he claimed the streams were real.

He tried other supply tricks before the AI catalog stuck. He used a publicist’s roster. He tried to sell fake streams as a service to other musicians. Neither gave him enough titles to hide in. The emails show he knew the anti-fraud rules were the constraint he was writing around, not a puzzle he thought was legal.

Why Artists Will Not Get the $8 Million Back

Chiuchiolo told Koeltl on Tuesday that the government was not seeking restitution. Harris said the same thing from the other table: there is no restitution because it cannot be calculated. That is the legal shadow of the pool. If every legitimate stream in a month is a little smaller, there is no victim list to pay.

THE MONEY THE PLEA ACTUALLY MOVED

• Gross intake: Smith obtained more than $14 million from royalty-paying entities over the life of the scheme.
• Agreed loss: Both sides subtracted estimates of organic streams and the money he pushed back into the pool by buying streaming accounts, and landed on $8,091,843.64.
• Forfeiture: He consented in March to a money judgment of $8,091,843.64, payable to the United States, not to other artists.
• Restitution: None was sought and none was ordered.

The government put that point in writing on Sept. 28. Every penny of the agreed loss, the letter said, was diverted to Smith; the loss was diffuse and the proceeds were not. Harris argued the other side of the same math, that $8 million spread across a huge field is different from $8 million taken from four people, and that any one artist’s injury was de minimis. Koeltl was unmoved by that as a reason to skip prison. He still declined to build a restitution grid the parties said they could not build.

A RIAA spokesperson said streaming fraud harms creators and deceives fans, and thanked the court for treating the gains as money taken from real artists, songwriters, and their label partners. Michael Lewan, executive director of the Music Fights Fraud Alliance, said Smith undermined trust and stole $8 million from artists and songwriters, then added that one prosecution does not finish the job. Koeltl, before imposing the term, said the victims are the artists.

Amazon Music Still Leaves the Door Unclear

Harris tried to cast the years 2017 and 2018 as a fog. She said the field was largely unregulated when Smith started, that some platform terms did not then bar bot plays, and that “to this day, Amazon Music does not clearly prohibit artificial streaming.” Koeltl asked whether she meant AI songs or fake plays. She said she was not talking about AI songs. Chiuchiolo answered that the conduct was frowned on at the time, that Smith had not waived attorney-client privilege on any advice he claimed to have gotten, and that at the plea the court had asked whether he knew it was illegal and had not received a simple no.

WHERE THE SENTENCING ARGUMENT SPLIT

• Prosecutors: Chiuchiolo said jail is how white-collar deterrence works, and that a light term would tell anyone watching that streaming fraud does not bring real punishment.
• Defense: Harris said only structural changes to how streaming pays will slow the fraud, and that shaming, foreclosure, and a felony already did the local work.
• The court: Koeltl treated the guideline math as high, treated the victims as real, and then split the difference under both official prison recommendations.

Platforms have moved some of the pipes since the scheme’s peak. Spotify has, since April 2024, required a track to clear 1,000 streams on the service in the prior 12 months before it earns recording royalties, a rule aimed at catalogs that mint pennies from a huge pile of near-silent titles. In September 2025 it described a music spam filter against mass uploads, plus tighter rules on voice clones. Deezer, which has been tagging fully AI-generated music, said in early 2026 that more than 60,000 such tracks were hitting it daily, and that up to 85 percent of streams on fully AI-generated tracks in 2025 were fraudulent. Apple Music vice president Oliver Schusser said the service demonetized about 2 billion fraudulent streams in 2025, about $17 million that would otherwise have left the pool.

Those are content and threshold patches. They do not change the fact that the biggest services still pay from a shared pot. Harris’s line about Amazon’s terms, if it holds, means at least one major service still has not written the obvious ban in language a defense lawyer cannot argue with. The 18-month term does not rewrite that contract.

A Test Case Leaves the Other Players Uncharged

Filings describe unnamed help: CC-1, who got a May 11, 2017 email telling him to “make up names and addresses” for family-plan bots; the chief executive of an unnamed AI music company; a music promoter; and data-entry workers abroad. The government has not publicly charged those people. Smith is the one with a judgment on the Manhattan criminal docket in his case, numbered 1:24-cr-00504.

THE DATES THAT BUILT THE FILE

1. May 11, 2017: Smith emails CC-1 to invent names and addresses for family-plan bot accounts, everyone over 18.
2. March 6, 2018: A Manhattan distributor flags one of his songs under the usual abuse criteria; he denies fraud as platforms keep asking.
3. October 4, 2018: He writes that the operation needs a huge catalog with small per-song totals so “the powers that be” stay quiet.
4. June 2019: He reports 88 million streams and about $110,000 a month.
5. April 2023: His YouTube Music family-plan catalog logs 80.9 million streams against 9.3 million for Taylor Swift’s entire catalog.
6. September 2024: A grand jury in Manhattan indicts him on three counts.
7. March 19, 2026: He pleads guilty to one conspiracy count and agrees to forfeit $8,091,843.64.
8. October 6, 2026: Koeltl imposes 18 months and two years of supervised release, with no restitution.

Friends and peers wrote letters asking that he stay home with his children. One of them was RZA of Wu-Tang Clan, who had released music with Smith, judged Smith’s rap contest One Shot, and in 2024 shared an executive-producer credit on the horror film Nyctophobia.

Mike has always acted honestly with me and with the artists and business partners we have worked with. I have seen him use his connections and resources to help people who might not have had those chances otherwise. I know the matter before the Court is serious, and I do not write this letter to make light of it.

RZA, character letter filed before sentencing

The defense asked that he serve the 18 months at the federal prison camp in Butner, North Carolina, close to home. Harris said he had a job offer from a music studio in Nashville if the court would leave him free to take it. Koeltl left him a prison term instead, and a forfeiture payable to the government. The artists whose slices of the April 2023 pools got thinner still have no order that pays them back.