Spotify Fraud | Matt Connarton Unleashed

0:00 Speaker 1: This is from a music businessworldwide dot com. I guess

0:03 Speaker 1: it was only a matter of time before something like

0:06 Speaker 1: this happened. Streaming fraud man who pocketed eight million dollars

0:12 Speaker 1: using hundreds of thousands of AI songs streamed billions of

0:17 Speaker 1: times by bots pleads guilty. So this guy set up

0:21 Speaker 1: a pretty elaborate scheme here, it says. The man at

0:26 Speaker 1: the center of what's been described as the first ever

0:28 Speaker 1: criminal prosecution for AI assisted streaming fraud in the US

0:32 Speaker 1: has pleaded guilty. Michael Smith of Cornelius, North Carolina, pleaded

0:37 Speaker 1: guilty on March nineteenth to one count of conspiracy to

0:40 Speaker 1: commit wirefraud before US District Judge John G. Coelty in

0:47 Speaker 1: the Southern District of New York. By the way, I

0:49 Speaker 1: feel like wirefraud is anything that isn't specific to you know,

0:54 Speaker 1: if it's not shoplifting or murder or something, it's wirefraud.

0:58 Speaker 1: You ever feel like that, Like just wiref is like

1:00 Speaker 1: this weird sort of catch all.

1:02 Speaker 2: Well, because it ended up morphing into the Internet.

1:05 Speaker 1: Right, anything involving anything electronic winds up becoming wirefraud.

1:09 Speaker 2: Yep.

1:11 Speaker 1: The charge carries a maximum sentence of five years in prison.

1:14 Speaker 1: Smith has also agreed to pay over eight million dollars

1:18 Speaker 1: in forfeiture. Wow, why does he actually still have it

1:21 Speaker 1: as just sitting in a bank account somewhere?

1:22 Speaker 2: I wonder like it.

1:23 Speaker 1: Smith is schedule to be sentenced on July twenty nine.

1:27 Speaker 1: US attorney Jay Clayton said, quote, Michael Smith generated thousands

1:32 Speaker 1: of fake songs using artificial intelligence and then streamed those

1:37 Speaker 1: fake songs billions of times. Although the songs and listeners

1:42 Speaker 1: were fake, the millions of dollars Smith stole was real,

1:47 Speaker 1: millions of dollars in royalties that Smith diverted from real

1:51 Speaker 1: deserving artists and rights holders. Unquote. So the guy, so

1:56 Speaker 1: he figured out, I mean, it's creative and ambitious. He

2:00 Speaker 1: figured out how to creat all these AI songs and

2:02 Speaker 1: then create bots that would stream them, because obviously the

2:05 Speaker 1: more streams you get, the more money you get if

2:07 Speaker 1: you're the artist.

2:09 Speaker 2: That's the thing right there. It's not so much the

2:11 Speaker 2: creating the songs with AI as it is the creating

2:15 Speaker 2: the bots and getting them to play the songs over

2:17 Speaker 2: and over and over against so he could get money. Right,

2:20 Speaker 2: That's the that's the real stinky part. Yeah, And in

2:24 Speaker 2: that I do agree that it is taking money away

2:26 Speaker 2: from jenuine artists.

2:28 Speaker 1: Right, it says. Smith was first arrested in September twenty

2:34 Speaker 1: twenty four in what was the first criminal case of

2:37 Speaker 1: its kind in the US. Like I said, it was

2:40 Speaker 1: inevitable at that time. He was charged with three felony counts,

2:44 Speaker 1: wire fraud, wire fraud conspiracy, and money laundering conspiracy, each

2:51 Speaker 1: carrying a maximum sentence of twenty years in prison. As

2:54 Speaker 1: Music Bausiness Worldwide report it, Smith initially pleaded not guilty

2:57 Speaker 1: in front of the judge in September twenty twenty and

3:00 Speaker 1: was released on a half million dollars bail. And by

3:06 Speaker 1: the way, if any of those charges sound redundant, wire fraud,

3:08 Speaker 1: wire fraud conspiracy, money laundering conspiracy. You know when they

3:13 Speaker 1: when they charge you with these things, they they try

3:15 Speaker 1: to charge you with everything they possibly can, right, so

3:18 Speaker 1: that see what can stick? See what can stick? Or

3:21 Speaker 1: if there ends up in.

3:22 Speaker 2: Charge per instance, So if there's one instance and then

3:25 Speaker 2: there's another instance, then that's two charges.

3:28 Speaker 1: And if there ends up being an opportunity for some

3:31 Speaker 1: sort of a plea deal, you don't want to, you know,

3:34 Speaker 1: if you're the prosecutors you want to be able to

3:35 Speaker 1: negotiate from you know, you want to have as many

3:38 Speaker 1: things on the table as possible, right, So you know,

3:41 Speaker 1: if you in other words, if if the uh, if

3:45 Speaker 1: the defense wants to plead something down, well you got

3:49 Speaker 1: to have as many things available to plead down from. Right.

3:53 Speaker 2: Yep.

3:54 Speaker 1: So it says today's guilty plea to a single conspiracy

3:58 Speaker 1: count carrying a max. So they did. They did a

4:02 Speaker 1: plead down carrying a maximum of five years rather than

4:05 Speaker 1: the combined sixty years he previously faced. Represents a significant

4:10 Speaker 1: reduction in Smith's legal exposure. According to the charging documents

4:15 Speaker 1: and statements made in court, Smith created thousands of bought

4:18 Speaker 1: accounts on streaming platforms including Amazon Music, Apple Music, Spotify,

4:22 Speaker 1: and YouTube Music, and used software to cause those accounts

4:26 Speaker 1: to continuously stream songs that he owned. Smith spread his

4:31 Speaker 1: automated streams across thousands of songs to avoid triggering the

4:35 Speaker 1: platform's anti fraud detection systems. To obtain the volume of

4:40 Speaker 1: tracks needed for the scheme to work, Smith turned to AI,

4:43 Speaker 1: using it to generate hundreds of thousands of songs. Those

4:47 Speaker 1: songs were streamed by his bought accounts billions of times

4:51 Speaker 1: allowing him to fraudulently collect more than eight million dollars

4:56 Speaker 1: in royalties at the peak of his operation. According to

5:00 Speaker 1: the Department of Justice, Smith estimated that his bots could

5:04 Speaker 1: generate approximately six hundred sixty one thousand, four hundred and

5:09 Speaker 1: forty streams per day, yielding annual royalties of over one

5:14 Speaker 1: point two million. The Mechanical Licensing Collective the MLC, which

5:18 Speaker 1: distributes mechanical royalties from streaming in the US, played a

5:22 Speaker 1: key role in identifying the fraud scheme. In a statement

5:25 Speaker 1: following today's guilty plea, the MLC said, quote, Today's news

5:29 Speaker 1: highlights the serious threat that streaming fraud poses to the

5:32 Speaker 1: music industry and the important role the MLC plays and

5:36 Speaker 1: confronting it. We appreciate the Department of Justice's swift action,

5:41 Speaker 1: recognizing that the MLC identified the fraud early, challenged Smith

5:45 Speaker 1: and his representatives, and prevented the diversion of mechanical royalties

5:49 Speaker 1: away from rightful songwriters. The MLC will continue to invest

5:52 Speaker 1: in anomaly detection and fraud prevention to protect our members,

5:56 Speaker 1: and we will continue to collaborate with other industry organizations

6:00 Speaker 1: and law enforcement to protect all songwriting royalties unquote. The

6:05 Speaker 1: MLC had previously raised concerns about Smith's catalog, questioning how

6:10 Speaker 1: he could produce such a high volume of music so quickly.

6:14 Speaker 1: Smith and his representatives denied at the time that his

6:18 Speaker 1: works were AI generated.

6:21 Speaker 2: Well, of course, he's trying to game the system, and

6:24 Speaker 2: he did. His problem was he was too greedy. He

6:27 Speaker 2: didn't quit while it was his head. Now he's in jail.

6:30 Speaker 1: Yeah, well that's what happens. I mean true, you know,

6:33 Speaker 1: that's that's how people get caught. They get greedy.

6:35 Speaker 2: Yep, you know, thousands of songs though. Wow, Yeah, he

6:40 Speaker 2: definitely was was determined.

6:43 Speaker 1: Yeah, but it is.

6:45 Speaker 2: Crappy if that's happened. With that happening, that it does

6:48 Speaker 2: rip off for a artist, because you know, all he's

6:50 Speaker 2: doing is just game in the system with these bots

6:53 Speaker 2: that are playing the song. It's not human. Nobody's hearing

6:56 Speaker 2: it for real, it's just a computer program playing repeat.

7:01 Speaker 1: But also in doing that, you know everything that you

7:06 Speaker 1: do online leaves a digital footprint. It's it's like he

7:11 Speaker 1: had to know on some level eventually he was going

7:14 Speaker 1: to get caught unless he was just so blinded by

7:16 Speaker 1: his screen. That's something I'm always fascinated by when when

7:19 Speaker 1: I see stories like this is the psychology of it

7:23 Speaker 1: is very interesting to me because they must know on

7:27 Speaker 1: some level, whether they're admitting the admitting it to themselves

7:30 Speaker 1: or not. Maybe it's subconscious, but they must know they're

7:33 Speaker 1: going to get caught because everything that you do online,

7:38 Speaker 1: you know, it's.

7:38 Speaker 2: Like a bag. I think they think they're not going

7:40 Speaker 2: to get caught. Maybe they're going to get away with

7:42 Speaker 2: it because they figured something new out, or maybe they

7:45 Speaker 2: figured out how to use the computer a different way.

7:48 Speaker 1: Bank robberies always make me think about this too, Like

7:51 Speaker 1: whenever I see a.

7:51 Speaker 2: Story, ever hear one getting away.

7:53 Speaker 1: Well, that's the thing, whenever I see a story about

7:55 Speaker 1: a bank robbery, it's always to me, it's always like

7:57 Speaker 1: people still even attempt to rob banks. There's there's no

8:01 Speaker 1: chance you're gonna get away with it.

8:03 Speaker 2: When's the last time we heard of somebody actually getting

8:05 Speaker 2: away with it?

8:05 Speaker 1: It doesn't happen exactly. I mean, Bonnie and Clyde didn't

8:09 Speaker 1: get away with it in the year you know, twenty

8:11 Speaker 1: twenty six. With all the technology that we have, nobody's

8:13 Speaker 1: getting away with that. But where people still try, like

8:16 Speaker 1: somebody will still walk into a bank and just hand

8:19 Speaker 1: the teller a note and think that they're gonna that

8:22 Speaker 1: they're gonna get away with it.

8:23 Speaker 2: Why do you think there's so many Karen videos? What

8:26 Speaker 2: do you mean there's so many videos of people doing

8:29 Speaker 2: bad behaviors? Oh yeah, because people too bad behaviors fite

8:34 Speaker 2: the fact that you should be smart enough to know

8:37 Speaker 2: there's a camera everywhere.

8:38 Speaker 1: Well yeah, but I'm talking. I'm talking specifically about crime

8:40 Speaker 1: and just the things that people think they're going to

8:42 Speaker 1: get away with or you know.

8:43 Speaker 2: Same category in my book, or the or the cut.

8:46 Speaker 1: Well, you know, we open.

8:47 Speaker 2: The think they're gonna get away with it.

8:48 Speaker 1: Look what we opened the show with the cops rated

8:51 Speaker 1: Afroman's home. Yep, they didn't get away with it. There

8:54 Speaker 1: were cameras all throughout get away. Thought they were going

8:56 Speaker 1: to get away with that.

8:57 Speaker 2: Yeah, Then when they realized there were cameras, they cut

8:59 Speaker 2: the cameras. But now it was too late.

9:00 Speaker 1: Yep.

9:01 Speaker 2: Yeah, and that just made them look all the more guilty.

9:04 Speaker 1: The other question this raises in my mind is how

9:07 Speaker 1: many other people are doing this? You just haven't been caught.

9:09 Speaker 2: There's gonna be some kind of a program that allows

9:11 Speaker 2: people to create these bought accounts as well. Yeah, because

9:16 Speaker 2: on the other side is seeing that as a human.

9:20 Speaker 1: Yeah, well, this guy was obviously very very smart. I mean,

9:23 Speaker 1: he's probably got a genius till now. Yeah, but he's

9:26 Speaker 1: probably well, I mean, his judgment is one thing, but

9:28 Speaker 1: in terms of being able to pull this off, and

9:30 Speaker 1: he's probably got a genius level IQ to be able

9:32 Speaker 1: to figure out how to do all that and then

9:33 Speaker 1: get away with it for as long as he did.

9:35 Speaker 2: Create a thousands of Like, how do you create that

9:37 Speaker 2: many songs? How do you create that many accounts?

9:40 Speaker 1: Right?

9:40 Speaker 2: I can't imagine how many bought accounts he had, right

9:42 Speaker 2: to get them to play enough to get him that

9:44 Speaker 2: kind of money?

9:45 Speaker 1: Yeah, what was it?

9:46 Speaker 2: A mill a month or something like that?

9:50 Speaker 1: No, one year?

9:51 Speaker 2: Oh, a year?

9:51 Speaker 1: So he did this over the course of years.

9:55 Speaker 2: Be like, you got a million, go away right, right?

9:57 Speaker 1: Yeah, you do it for a year and then you

9:58 Speaker 1: get out. Yeah, take a million and go comfortably, take

10:02 Speaker 1: a million, invest it, and you know, live.

10:04 Speaker 2: Comfortably for the rest of your life. But not not

10:06 Speaker 2: not greed, grotesque greed. Ah, yes, do we not talk

10:11 Speaker 2: about that all the time.

10:12 Speaker 1: I don't want to give anybody the wrong idea though.

10:13 Speaker 1: We're not suggesting that it would have been okay if

10:15 Speaker 1: he had just done this for a year. And you know, no,

10:17 Speaker 1: we're not. We're not condoning it. No, we're not condoning crime.

10:21 Speaker 1: I mean, this is criminal activity, and it stinks.

10:23 Speaker 2: Because it takes a lot of attention away from real artists.

10:27 Speaker 2: And plus those illicit plays are going to show up.

10:30 Speaker 2: They're gonna try and make those songs go viral by

10:33 Speaker 2: their plays. Yeah, so it messes up a lot for

10:38 Speaker 2: a lot of real people and real artists.

10:40 Speaker 1: Yeah, so that's stinky. Absolutely, it was a little bit

10:47 Speaker 1: more to this. The case was prosecuted by the Complex

10:50 Speaker 1: Fraud and Cyber Crime Unit of the US Attorney's Office

10:53 Speaker 1: for the SDN Y. Assistant US attorneys Nicholas Chucciello and

10:58 Speaker 1: Kevin Mead led the prosecution. The original indictment named unnamed.

11:03 Speaker 1: Oh this is interesting, named unnamed co conspirators, including the

11:08 Speaker 1: CEO of an AI music company and a music promoter

11:11 Speaker 1: who helped Smith produce the AI generated tracks. The legal

11:15 Speaker 1: status their legal status has not yet been publicly disclosed.

11:19 Speaker 2: Oh.

11:19 Speaker 1: Because one of the things he was originally charged with

11:21 Speaker 1: was conspiracy. Smith's case.

11:26 Speaker 2: The p that there are other people involved.

11:27 Speaker 1: Yeah.

11:28 Speaker 2: Yeah.

11:29 Speaker 1: His case is the highest profile criminal prosecution for streaming

11:32 Speaker 1: fraud globally, but it's not the only one. In Denmark,

11:36 Speaker 1: a man was sentenced to eighteen months in prison in

11:38 Speaker 1: March twenty twenty four after being found guilty of data

11:41 Speaker 1: fraud and copyright infringement for using bots to inflate the

11:45 Speaker 1: stream count on six hundred and eighty nine tracks uploaded

11:48 Speaker 1: to platforms including Apple Music, Spotify, and U See Music.

11:52 Speaker 1: That sentence was subsequently increased by to twenty four months

11:57 Speaker 1: by the Western High Court of Denmark in February of

12:00 Speaker 1: twenty five after judges found evidence of more extensive fraudow

12:05 Speaker 1: than initially proven. So apparently in their system in Denmark

12:08 Speaker 1: you can.

12:09 Speaker 2: Double JEOPARDI they could just up your up your sentence. Wow.

12:15 Speaker 1: I think they can do that in the US too.

12:16 Speaker 1: It just doesn't happen for your sentence. I feel like

12:20 Speaker 1: I feel like there was a weird case charged you

12:24 Speaker 1: with something. There was something in the United States where

12:27 Speaker 1: something like that was done, and I think that this

12:30 Speaker 1: was a while ago. I'll have to look it up.

12:32 Speaker 1: I think there's something like that was done where a judge,

12:36 Speaker 1: a higher court judge overruled somebody else's Oh you know

12:41 Speaker 1: what I think it was. So a judge had reduced

12:45 Speaker 1: somebody's sentence, and then another judge overturned the reduction and

12:51 Speaker 1: restored the original sentence. It was something weird, and it

12:55 Speaker 1: was it was something no, not exactly but well it

12:59 Speaker 1: did effectively add or time. But there was something weird

13:02 Speaker 1: like that that happened in the US that made people

13:04 Speaker 1: really upset. Because it's in theory, so that's not supposed

13:07 Speaker 1: to happen.

13:08 Speaker 2: But