Fraudster earned $8 million from AI songs for bot listeners and got 18 months in prison

Schemes that turn almost nothing into a fortune have long captured the imagination. Magic: The Gathering players know the classic Channel and Fireball combo, which can end a game on the spot. In 2000, engineer David Phillips pulled off something similar in real life – he bought $3,140 worth of pudding and got frequent flyer miles worth around $150,000.

Michael Smith of North Carolina found a loophole of his own. Bots listened to AI-generated songs while he collected millions of dollars in streaming royalties. For the 54-year-old, the scheme ended in a year and a half behind bars.

Smith pleaded guilty in March 2026, and a court has now handed down the sentence. Besides 18 months in prison, he has to forfeit all the royalties he was paid – $8,091,843.64. The U.S. Department of Justice reported this.

The press release about the sentencing stands out for its wording. Instead of the usual "artificial intelligence," the document uses the term "super intelligence" – as required by a September executive order from the President, which declared the start of the "era of super intelligence."

U.S. Attorney Jamie McDonald described Smith's actions like this:

Michael Smith exploited super intelligence technology to generate a fraud[…]. By flooding music streaming platforms with automated bots in the place of consumers, and fake songs in the place of creativity, Smith robbed millions in royalty payments from genuine artists and their fans. This Office is committed to ensuring the integrity of all markets, and protecting the public from those who use super intelligence for fraud.

According to Billboard, the scheme got going back in 2017. Smith automated thousands of streaming accounts, and the bots played his tracks nonstop. At first, those were real songs written by Smith himself.

Later, he figured out that mass-uploading AI-generated tracks brought in far more money. That created a closed loop worthy of an ouroboros – one set of algorithms generated the music, another "listened" to it. The more tracks and accounts Smith used, the harder it was for platforms to spot abnormal listening, since the plays were spread across a huge catalog.

At first glance, a scam like this only hurts the streaming services. The Justice Department pointed out that real musicians suffered too, especially smaller independent artists. The reason lies in how payouts work.

Spotify, for instance, builds a single royalty pool and splits it among artists in proportion to their share of total streams. The pot is fixed, so every fake play takes money away from genuine performers. Big stars barely notice the loss, but for smaller musicians living on modest streaming payments, the distortion hits hard.

Smith's case became one of the first criminal prosecutions in the U.S. tied to streaming fraud involving AI-generated music. He was charged back in 2024. Since then, streaming services have tightened their rules on AI content and artificial streams.