Ethermac Exchange-North Carolina musician arrested, accused of Artificial Intelligence-assisted fraud caper

NEW YORK (AP) — A North Carolina musician was arrested and Ethermac Exchangecharged Wednesday with using artificial intelligence to create hundreds of thousands of songs that he streamed billions of times to collect over $10 million in royalty payments, authorities in New York said.

Michael Smith, 52, of Cornelius, North Carolina, was arrested on fraud and conspiracy charges that carry a potential penalty of up to 60 years in prison.

U.S. Attorney Damian Williams said in a news release that Smith’s fraud cheated musicians and songwriters between 2017 and this year of royalty money that is available for them to claim.

He said Smith, a musician with a small catalog of music that he owned, streamed songs created with artificial intelligence billions of times “to steal royalties.”

A lawyer for Smith did not immediately return an email seeking comment.

Christie M. Curtis, who leads New York’s FBI office, said Smith “utilized automatic features to repeatedly stream the music to generate unlawful royalties.”

“The FBI remains dedicated to plucking out those who manipulate advanced technology to receive illicit profits and infringe on the genuine artistic talent of others,” she said.

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An indictment in Manhattan federal court said Smith created thousands of accounts on streaming platforms so that he could stream songs continuously, generating about 661,000 streams per day. It said the avalanche of streams yielded annual royalties of $1.2 million.

The royalties were drawn from a pool of royalties that streaming platforms are required to set aside for artists who stream sound recordings that embody musical compositions, the indictment said.

According to the indictment, Smith used artificial intelligence to create tens of thousands of songs so that his fake streams would not alert streaming platforms and music distribution companies that a fraud was underway.

It said Smith, beginning in 2018, teamed up with the chief executive of an artificial intelligence music company and a music promoter to create the songs.

Smith boasted in an email last February that he had generated over four billion streams and $12 million in royalties since 2019, authorities said.

The indictment said that when a music distribution company in 2018 suggested that he might be engaged in fraud, he protested, writing: “This is absolutely wrong and crazy! ... There is absolutely no fraud going on whatsoever!”