Feds Indict Musician on Landmark Massive Streaming Fraud Charges (rollingstone.com) 87
Federal investigators have indicted a North Carolina man over a scheme in which he allegedly used bot accounts and hundreds of thousands of AI-generated songs to earn more than $10 million in royalty payments from the major streaming services. RollingStone: The case is a landmark development in the still-developing music streaming market, with the U.S. Attorney's Office for the Southern District of New York calling it the first criminal case involving artificially inflated music streaming. In the indictment, the prosecutors say that for the past seven years, North Carolina musician Michael Smith had been running a complex music streaming manipulation scheme to fraudulently profit off of billions of streams from bot accounts. "At a certain point in the charged time period, Smith estimated that he could use the Bot Accounts to generate approximately 661,440 streams per day, yielding annual royalties of $1,207,128," the prosecutors said in the indictment announcement.
Smith, 52, was charged with wire fraud conspiracy, wire fraud and money laundering conspiracy, totaling to a combined maximum of 60 years in prison if convicted. "Through his brazen fraud scheme, Smith stole millions in royalties that should have been paid to musicians, songwriters, and other rights holders whose songs were legitimately streamed," said Damian Williams, U.S. Attorney for the Southern District of New York. "Today, thanks to the work of the FBI and the career prosecutors of this Office, it's time for Smith to face the music."
Smith, 52, was charged with wire fraud conspiracy, wire fraud and money laundering conspiracy, totaling to a combined maximum of 60 years in prison if convicted. "Through his brazen fraud scheme, Smith stole millions in royalties that should have been paid to musicians, songwriters, and other rights holders whose songs were legitimately streamed," said Damian Williams, U.S. Attorney for the Southern District of New York. "Today, thanks to the work of the FBI and the career prosecutors of this Office, it's time for Smith to face the music."
Idiots scamming idiots scamming idiots (Score:5, Interesting)
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get an good lawyer and demand an jury trial also p (Score:3)
get an good lawyer and demand an jury trial also put the EULA on the record and make the the jury read the full thing!
Re:Idiots scamming idiots scamming idiots (Score:4, Informative)
I agree - what specific laws did he break? Wire fraud? Money Laundering? I think it's a bigger story than what is being written if they are pushing breaking the TOS as a federal crime and not a civil business dispute.
He defrauded companies by using bots to make it seem people were "listening" to his "music". In other words, he created fake impressions (to use an old term) and got paid for it. The music wasn't real nor were the listeners, yet he was getting money from the companies. Or, as it was written in the blurb:
"Through his brazen fraud scheme, Smith stole millions in royalties that should have been paid to musicians, songwriters, and other rights holders whose songs were legitimately streamed,
Fraud and money laundering are criminal indictments, not civil.
Re:Idiots scamming idiots scamming idiots (Score:4, Insightful)
' If he had not executed this scheme, those millions would have been kept by the streaming services.'
That's not how it works. There is a set amount paid out by the streaming services, and it's distributed by the percentage of all streams a particular musician received. So if he hadn't done this the streaming service would have still paid out the same amount and the legitimate musicians would have received more of it.
Re: Idiots scamming idiots scamming idiots (Score:5, Insightful)
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Perhaps they should go after the major record companies that invest in the streaming services that deliberately negotiate low royalties so they can pay themselves dividends that they don't have to share with artists.
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If he had not executed this scheme, those millions would have been kept by the streaming services
Spotify and others have agreements where royalties are paid out based on streamshare. The streaming services don't keep more - the other artists/labels would have gotten more.
They also did this with multiple fake accounts, hiding his identity to get around restrictions - that is absolutely textbook wire fraud. Those accounts each represented thousands of AI-generated songs that were represented as human songs. And then he funneled money from the fake names to his own identity - money laundering.
wire fraud for going around an TOS? (Score:2)
so if you use adblock you can face wire fraud changes?
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In what way is that even comparable to what I described? Are you somehow collecting money from multiple ad blockers under different pseudonyms?
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they can say Add block lets view content without paying and by doing that you are committing fraud by passing our payment system.
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Using a fake name to create accounts and receive money online is wire fraud. It's not simply being automated that's the problem here. If you did it in person with paper contracts and fake IDs it is fraud and illegal too. But not interstate so it would be a state and not federal crime.
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but just viewing stuff with free accounts is wire fraud?
Hell an TOS can say one account per house hold and if you say have each person in the house make there own account does that become wire fraud?
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He posted the actual (mostly fake AI generated) content under multiple accounts, most of those not with the real identity.
The click fraud would be a civil TOS violation, at best. This is not about the clicks themselves.
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posting content under fake accounts is one thing.
But viewing is just an TOS violation and can set some VERY dangerous precedents about BS like click fraud.
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However, I disagree that he "... stole millions in royalties that should have been paid to musicians, songwriters, and other rights holders whose songs were legitimately streamed..." . If he had not executed this scheme, those millions would have been kept by the streaming services.
I'm not sure that's valid. Take Spotify's policy;
"How we calculate and process royalties
We distribute the net revenue from Premium subscription fees and ads to rightsholders. To calculate net revenue, we subtract the money we col
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Interesting. I thought it was a per-play schedule, thanks for pointing that out. I am still skeptical about the true dollar amount he would have stolen from other artists because a portion of the monies paid out in total came from his bots streaming music, therefore "listening" to ads. But I can see the validity of the claim he stole from other artists.
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by the description, he was stealing music, not creating it. Why the heck is he a musician then?
I just read TFS and TFA and did not reach that conclusion.
It seems he is a musician, but was not stealing music. He was creating it using AI (a separate discussion, but IMHO technically not stealing) and then using AI bots to boost (fraudulently) the profile of the AI-generated music.
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The music wasn't real nor were the listeners
This is what does not make sense. If the listeners are not real, then how is there a paid up account on the music streaming service listening to his song?
If he has a million streams, then there ought to be a million accounts on that music service, and even if it's one of the cheapest, say Amazon Music at $10/Month or Spotify' $12/Month; The monthly cost he would end up paying for false listener accounts would far exceed the possible royalty numbers.
Unless y
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Re: Idiots scamming idiots scamming idiots (Score:2)
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"Fraud" and "money laundering" are charges that prosecutors resort to when they don't have any actual crimes they can use to charge the defendant. The laws are so nebulous as to be applicable to anything the DOJ feels like prosecuting.
Explain to me how this is illegal. I
Tactic to legal sanity. (Score:2)
I agree - what specific laws did he break? Wire fraud? Money Laundering? I think it's a bigger story than what is being written if they are pushing breaking the TOS as a federal crime and not a civil business dispute.
To be honest, AI-generated songs sounds like a fine way to finally shine a light on the obscene legal threats limiting song creation excused under the guise of artist protection.
As if ol’ Eddie ‘Four Chords’ Sheeran didn’t make that obvious enough.
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Probably all of the above. However, it's important to remember that by its very nature, his scheme included crossing state lines, making it Interstate Commerce, and that brings the feds in, meaning that when, not if he's convicted, he's going to end up doing time in a Federal location in the Greybar Hotel chain.
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I agree - what specific laws did he break? Wire fraud? Money Laundering? I think it's a bigger story than what is being written if they are pushing breaking the TOS as a federal crime and not a civil business dispute.
The first thing I thought of was that he claimed ownership of content that was AI generated. You cannot own content that is AI generated and so is now fraud.
But it seems like they are going with wire fraud. Using bots is electronic communications and fake streams are defrauding royalties.
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Smith, 52, was charged with wire fraud conspiracy, wire fraud and money laundering conspiracy, totaling to a combined maximum of 60 years in prison if convicted.
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Anyone else find it disturbing that this crime has a potential for 60 years but in CA, lewd sexual acts on a child under 14 carries a maximum penalty of just 8 years? What the hell is wrong with our legal system? I get he defrauded people, or corporations, but FFS he didnt rape kids.
California Penal Code 288(a) says that any individual who commits a lewd or lascivious act against a child who is under the age of 14 years old is guilty of a felony sex crime and can be sentenced up to 8 years in a California state prison
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You haven't figured it out yet?
Rob the powerless and face little to no consequences.
Rob someone with money, and you violated the order of things. You will face the brute force of the legal system.
Bernie Madoff is a prime example. If he kept his scam targeting poor people, he would have likely been able to coast but because he had some high rollers he swindled, he suffered consequences.
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It's especially interesting to contrast Bernie Madoff vs. Scott Tucker. Bernie Madoff stole some excess money off of about 51k rich people. Scott Tucker took the last scraps of money from about 3M poor people. Bernie Madoff got almost an order of magnitude more time in jail.
Re: Idiots scamming idiots scamming idiots (Score:2)
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This counts as a form of property theft involving $$$ and a corporation.
Of course it has the potential for real penalties.
Kids? No corporation is harmed there.
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ut I'm not sure that what this guy did technically even violates the terms of service, much less federal criminal law.
You don't think he broke a law by using bots to generate fake eyeballs/ears to his songs? Try looking up the term 'fraud'.
Re: Idiots scamming idiots scamming idiots (Score:2)
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Intent is always relevant.
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I don't think an EULA needs to specifically spell out what constitutes fraud, that's a Common Law tort that's been around, well, probably in one form or another as long as there has been Common Law. In this case, it's pretty clear cut. The guy puts up a bunch of AI-generated songs, which in and of themselves, doubtless would I suppose be fine, but then uses fake accounts and bots to generate hits. The two put together represent a blatant act of fraud.
The nice (and sometimes bad) thing about the law, civil o
Re: Idiots scamming idiots scamming idiots (Score:2)
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They went for "money laundering, wire fraud and conspiracy to commit wire fraud" which seems to not directly relate to just TOS violations.
If it was just fraudulent streams of his songs, the correct legal structure for a case like this would be a class action by the labels or the streaming providers. Because they had fraudulently accessed systems to take a larger share of revenue sharing. Spotify and others skip ASCAP/BMI/etc in favor of negotiating directly with labels and artists. They make labels and
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If you generate fake traffic for something that didn't occur, royalties are paid out from either ad revenue or subscription fee revenues.
In the case of ad revenue, he's taking money that originally comes from companies paying for ad placements that were not actually played for or shown to a person. That's fraud. If his bots did not generate impressions, he took a undue percentage of the revenue pool for song plays that generated no revenue. That's fraud.
In the case of subscription fees, he's making less of
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But I'm not sure that what this guy did technically even violates the terms of service, much less federal criminal law.
Terms of service aren't required to spell out cases of fraud. Fraud is "wrongful and criminal deception" and is a federal criminal law in the USA. The reality is the use of bots to artificially inflate numbers that are used to gauge humans - especially in lieu of normal paying humans - in order to generate income is a perfect example of textbook fraud.
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I've read the article, which, like all articles touching on science or the law, idiotically free of relevant detail. But I'm not sure that what this guy did technically even violates the terms of service, much less federal criminal law. To paraphrase Bart Simpson's remedial kindergarten teacher, it sounds like Spotify has a case of the Not Sposetas.
I don't know why Slashdot doesn't link primary sources, but here it is [justice.gov]. Note there is a link to a PDF at the bottom that contains a massive amount of details.
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It sounds like he used a computer to generate music and then got computers to listen to it. Is there anything wrong with that?
But it resulted in rich people losing money, and we can't have that.
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I've read the article, which, like all articles touching on science or the law, idiotically free of relevant detail. But I'm not sure that what this guy did technically even violates the terms of service, much less federal criminal law. To paraphrase Bart Simpson's remedial kindergarten teacher, it sounds like Spotify has a case of the Not Sposetas.
From what I can gather from asking LLMs to to analyze the multitude of articles written about this topic, they are charging him with wire fraud - using electronic communications to defraud others.
They are claiming that bots are electronic communications and using fake streams from bots to earn royalty is defrauding.
None of the articles link to anything useful and just use flowery language to say nothing much at all. I wouldn't be surprised if most of the articles are LLM supplemented.
Re: Idiots scamming idiots scamming idiots (Score:2)
need to use discovery to get source code and (Score:2)
need to use discovery to get source code and algorithms settings!
and if they can't give you that YOU MUST AQUIT!
The platforms create systems for monetizing (Score:5, Interesting)
Saying that most of the activity on those platforms is inorganic/fake/semi-automated isn't a particularly new or groundbreaking thing to say but here's the part that no one wants to admit: Whoever is looking at the back-end of those platforms can tell the difference between 100k users and 1 user with 100k accounts.
Social media platforms were deliberately gameified. They are games. Games have rules and those rules determine the behavior of the players. But going one step you can extrapolate that the rules are created by developers in order to incentivize certain behavior. These platforms needed to pay this guy and thousands like him or he doesn't generate and manage a swarm of bots. If they don't do that, then these platforms can't sell advertising because they don't have metrics. The game theory of this situation squarely places all the blame on folks that created the rules, the folks taking advantage of them.
Web 2.0 has failed. All of the platforms have become unproductive and inhospitable to organic human behavior.
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That's likely arguing people put doors in their houses to allow burglars to monetize entering through said doors.
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Your comparison is entirely unrelated to what actually happened. This guy ain't the only one and in fact most researchers think most of the activity online comes form folks like this guy.
Web 2.0 has failed. The developers decided on rules that they knew would incentivize the creation of false metrics and have spe
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And everybody has doors...
Re:The platforms create systems for monetizing (Score:5, Insightful)
WTF is this even supposed to mean with regards to the content of this article? "Web 2.0" has nothing to do with anything, and no it hasn't "failed". Do you even know what "Web 2.0" is supposed to mean?
The brave new world of AI (Score:2)
Well, that's certainly a twist (Score:4, Informative)
At first I thought this scam was just yet another indication of how bad current music is, that $12 million in mechanical license fees could be earned by AI-generated tunes over just a few years. Reading a bit more deeply, I see that not even his "audience" was genuine, he had tens of thousands of bots hitting his playlists of AI-generated tunes. But how did he create so many fake accounts? By creating fake companies and getting a legitimate debit card company to mass-issue debit cards to his "employees".
This is very clever, indeed. Quite the scam. There's no need to worry about the decline of musical taste, the whole damn thing is turtles, all the way down.
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Create a virtual world to stream ads to virtual eyeballs
Wait, who is making money off of Mr Whitey and NiCola?!!
Stealing Profits, not artist royalties (Score:1)
> Smith stole millions in royalties that should have been paid to musicians, songwriters, and other rights holders whose songs were legitimately streamed,"
Actually, no. He stole PROFIT from the streaming companies, and I guess that is just unforgivable.
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False he stole royalties. Profits come from the creation of paid accounts, which he didn't do. Spotify takes the total revenue, sets aside a fixed amount for royalty payouts, and then pays by dividing down the number of total streams to determine the royalties per stream from the fixed pool of money.
Literally every dollar of royalties he "earned" fraudulently is a dollar that would have been distributed to other artists. He didn't steal a cent from Spotify.
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No it wouldn't have. Why do you think it would have been distributed to other artists? The royalty was for a specific song play, to a specific artist (this fraudster). If that play hadn't happened, spotify wouldn't have paid that particular royalty payment to anyone. It's not like the play and royalty count for other songs from other artists would go up if the bots were not listenin
Think of the artists! (Score:1)
What stuck out to me was this line: "Smith stole millions in royalties that should have been paid to musicians, songwriters, and other rights holders whose songs were legitimately streamed."
How do you figure? The bots were only ever going to stream the fake music, not other "legitimate" songs. If the bots didn't exist, the streaming service would have held onto that money, since they only pay out for songs that are streamed.
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I'm also reminded of the Frederik Pohl story "The Midas Plague." Worth a read if you're not familiar with it.
https://archive.org/details/ga... [archive.org]
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If the bots didn't exist, the streaming service would have held onto that money
No that's now how it works. Spotify don't pay a fixed amount per stream. The pay out from a pool of money based on the total stream across all artists. Literally those $10m came from devaluing streams to other artists.
How did he "steal" from artists? (Score:2)
Smith stole millions in royalties that should have been paid to musicians, songwriters, and other rights holders whose songs were legitimately streamed
Isn't that False? My understanding is the royalties streaming companies are required to Pay are a fixed amount per stream.
If he had not inflated the number of streams, then the Total number of streams would be Less, Then the total Amount of Royalties paid out by the streaming companies would have been Reduced by that fixed amount, And the royalties Paid
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from https://support.spotify.com/us... [spotify.com]:
"We calculate streamshare by tallying the total number of streams in a given month and determining what proportion of those streams were people listening to music owned or controlled by a particular rightsholder.
Contrary to what you might have heard, Spotify does not pay artist royalties according to a per-play or per-stream rate; the royalty payments that artists receive might vary according to differences in how their music is streamed or the agreements they have wit
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Isn't that False? My understanding is the royalties streaming companies are required to Pay are a fixed amount per stream.
You understand wrong. It's a fixed *percentage*. The actual royalties per stream are based on a stream share of total streams, so if a certain percentage of them is fraudulent then it's literally devaluing legitimate streams to pay for illegitimate ones.
This is also why Tidal got investigated for fraudulently inflating the number of streams for Jay-Z's buddies Kanye (Ye of little brains) and Beyonce. The allegedly inflated play numbers didn't just net them money, it devalued the royalties of the other artis
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So an AI (call it a Cylon) composed Cylon music, and other Cylons listened to it and someone got paid in proportion to fraction of Cylon music to total music.
But the streaming company is angry because the Cylon market is not important to the human advertisers, and those advertisers will be demanding refunds appropriate to the fraction of Cylon streams.
I think I have a handle on this now.
Too big to fail (Score:2)
And yet ... (Score:2)
Too bad they caught him (Score:2)
This guy is a poster boy for our corporate-owned government's selective prosecution. He probably can't afford to hire a pack of ruthless, predatory lawyers who would jump the government through so many legal hoops on the way to a wrist slap, or even acquittal, that they'd never dare bring charges in the first place.
I would dearly love to see a jury decide that what the guy did may have been unethical, but wasn't so different from the kind of manipulation we're subjected to by our corporate masters. How of
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How often are we tricked into paying a premium price, or agreeing with an opinion we believe is far more popular than it is, by huge numbers of "Likes" or "Re-tweets" generated by bots?
This exact thing is actually made illegal under the new FTC rules going into effect this month. We'll see how well it gets enforced. Or if it gets tossed by a court.
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Interesting! Thanks for that. It would be a complete travesty if the guy named above is convicted, but bigger fish are allowed to continue business as usual.
the jury has the power to nullify (Score:2)
the jury has the power to nullify
If youre going to steal (Score:3)
How is this different? (Score:2)
How is this any different from big music publishers who put up a new song and then use payola to promote the song? This is how the music industry works. The way it's always worked.
So in the US ... (Score:2)
the criminal laws protect the parasitic streaming companies? Interesting. Land of the free!
well why not those companies (Score:2)
Eliminate the competition (Score:2)
Exactly which law requires profits from a machine to be paid to "musicians, songwriters, and" others? In fact, who owns the IP created by this AI? Does that mean every AI-generated song has a responsibility to give money to people having nothing to do with AI-generated songs?
It seems this state is trying to blackmail the newcomer so "other rights-holders" don't have to compete.