A North Carolina musician, Michael Smith, 52, has pleaded not guilty to charges related to a $10 million streaming fraud scheme. The case, which began in Manhattan under US District Judge John Koeltl, has set bail at $500,000.

The US government indictment alleges Smith orchestrated a complex scheme involving:

• Creation of hundreds of thousands of AI-generated songs
• Use of automated bots to generate millions of streams
• Creation of fake email and cloud service accounts
• Purchase of multiple family plans on streaming platforms

According to court documents, Smith calculated he could generate 661,440 streams daily, potentially earning around $1.2 million annually in royalties.

Spotify has confirmed that their platform accounted for less than 1% ($60,000) of the total fraudulent earnings, crediting their robust fraud detection systems. An unnamed streaming service (later identified as Spotify) detected and stopped payments to Smith as early as 2019.

The Mechanical Licensing Collective also identified irregularities in Smith's streaming data and suspended related royalty payments. This coincides with their recent partnership with Beatdapp, a fraud detection platform that estimates streaming fraud costs artists approximately $2 billion in lost royalties annually.

Smith faces three felony counts as the case proceeds through the legal system.

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