The Hidden Dangers of AI in Music: Exposing a $10 Million Streaming Fraud Scheme

As technology continues to reshape the creative industries, AI's role in music production has sparked both innovation and controversy. From generating hit tracks to automating composition, AI promises to democratize access to music creation. However, a recent case involving alleged fraud highlights the darker side of this technology. In this post, we'll delve into the story of two musicians entangled in what could be the first major AI-driven streaming fraud case in the US, drawing from reports of their experiences. We'll explore the facts objectively, examining the implications for the tech and music worlds.

The Unlikely Duo and Their Pursuit of Fame

In the world of independent music, success often feels elusive, with slim odds of breaking through the noise. Enter Mike Smith and Jonathan Hay, two collaborators whose paths crossed in the mid-2010s. Smith, a successful entrepreneur running medical clinics in Charlotte, North Carolina, brought a polished, business-oriented approach to their partnership. Hay, a music publicist with a more eclectic background, including promoting industry rumors and working with various artists, provided the creative spark. Together, they aimed to produce jazz albums that could finally garner the recognition they sought.

Their first project, an album simply titled Jazz, was released in 2017 across major platforms like Spotify, Apple Music, and Tidal. Despite their efforts, it didn't gain much traction initially. Undeterred, the duo rereleased an updated version, Jazz (Deluxe), in early 2018. To their surprise, it quickly climbed the Billboard charts, even reaching No. 1. This sudden success raised eyebrows—Hay later recalled the odd lack of fan engagement, with no social media buzz or organic discussions online.

As Hay dug deeper into the analytics, red flags emerged. Streams were concentrated in unexpected regions like Vietnam, and distributors began flagging the music for potential fraud. According to Hay's account, Smith initially attributed the issues to licensing errors with samples. However, as investigations intensified, it became clear that something more sinister might be at play.

The Unraveling: From Suspicion to Federal Charges

The story took a dramatic turn when streaming platforms started removing their tracks, citing violations of their fraud policies. Hay, growing increasingly alarmed, pressed Smith for answers. Eventually, Smith admitted to instructing his clinic staff to stream the songs repeatedly—a tactic that seemed insufficient to explain the scale of the streams. Fast-forward to September 2023, and Smith found himself at the center of a federal probe. The FBI arrested him, charging him with orchestrating a scheme that allegedly generated over $10 million in royalties through AI-generated tracks and bot networks.

According to the charges, between 2017 and 2024, Smith used AI tools to create and distribute music tracks en masse. Bots—automated programs—were programmed to play these tracks continuously on streaming services, artificially inflating listen counts and triggering royalty payouts. This marks a significant milestone as the first known AI-related streaming fraud case in the United States. Smith has pleaded not guilty, and his legal team has not provided detailed comments, leaving much of the narrative reliant on Hay's recollections and corroborating interviews with industry insiders.

The role of AI in this alleged fraud is particularly noteworthy. AI algorithms can generate music quickly and cheaply, mimicking popular styles without the need for human musicians. When combined with bot farms—networks of automated accounts—the result is a deceptive amplification of content. Streaming platforms rely on algorithms to detect such anomalies, but as AI evolves, so do the methods to evade detection. This case underscores how advanced technologies, originally designed for efficiency, can be weaponized for illicit gains.

While the full details are still unfolding in court, experts in AI and digital ethics point out that this incident isn't isolated. Similar cases have cropped up globally, where creators exploit platform vulnerabilities to game the system. The music industry, already disrupted by digital streaming, now faces new challenges in verifying the authenticity of content and engagement.