Michael Smith is due to be sentenced in Manhattan federal court on Tuesday (October 6) in what the US Attorney’s Office has called the first criminal case involving artificially inflated music streaming.
He pleaded guilty on March 19, 2026 to a single count of conspiracy to commit wire fraud under 18 U.S.C. § 371, which carries a maximum of five years, as MBW reported.
That plea, to a one-count information, replaced the three counts he was charged with in September 2024, which carried 60 years between them.
Prosecutors are asking for at least 46 months, in an 11-page letter filed on September 29 that can be read in full here.
Start with the pool
None of the arithmetic in this case makes sense without pro rata, the model the biggest DSPs still run on.
A service does not pay per stream from its own pocket: it sets aside a share of revenue as a pool, then allocates that pool by streamshare.
A track taking 1% of the month’s streams takes 1% of the month’s money, so a stream has no fixed price; it has a price set by what everyone else did that month.
That is why fraud here is not theft from a DSP. It is dilution: a fake stream shrinks the slice under every real one.
Two separate pipes run on that logic, and the distinction matters for how Smith was caught.
Sound recording royalties flow from the DSPs to labels and distributors, which is the pipe Spotify‘s detection systems police directly.
Publishing royalties flow instead to PROs and, for US digital mechanicals, to The Mechanical Licensing Collective (The MLC) – a route that recording-royalty thresholds, by definition, do not reach.
The half-cent spreadsheet
Early in the scheme, Smith emailed himself the model: 52 cloud accounts, each running 20 bot accounts, for 1,040 bot accounts in total.
Each one could stream about 636 songs a day, which gave him a projected ceiling of roughly 661,440 streams daily.
At an assumed half a cent per stream, he put daily royalties at USD $3,307.20, monthly at $99,216, and annual at $1,207,128.
That half-cent is itself a pro-rata estimate, not a rate card, and his own numbers moved accordingly: by June 2019 he reported “we are at 88 million TOTAL STREAMS so far!!!” and earnings of about $110,000 a month, against a model that had projected $99,216.
Two plays a day
Smith knew that volume alone would expose him.
He put it in writing on October 4, 2018: “in order to not raise any issues with the powers that be we need a TON of content with small amounts of Streams.”
And on May 9, 2019: “I can’t run the bots without content. And I need enough content so I don’t overrun each song.
“That’s the problem. If we get too many streams on one song it comes down.”
Take that opening configuration at face value. Spread 661,440 daily streams across 300,000 tracks, a scale consistent with the “hundreds of thousands” of AI songs the indictment and the DOJ have cited throughout, and each song takes about two plays a day.
Annualized, that is roughly 805 streams per track across every platform combined: noise against any per-track threshold.
Neither side of that fraction stayed still. Prosecutors say Smith had as many as 10,000 bot accounts active at certain points; the catalog was built out alongside the fleet; and the sentencing letter elsewhere puts the song count at “tens of thousands” rather than hundreds of thousands. The figure is a floor drawn from his own numbers rather than a steady state. But the design principle never changed, and it is the one he wrote down himself: never let any single song carry enough traffic to be worth looking at.
Why 46 months
The USD $8.09M loss figure is doing the work in the sentencing fight.
Smith took more than $14M from royalty-paying entities in total; the agreed loss is what remains after backing out his organic royalties and the money he pushed back into the pool buying streaming accounts.
The letter sets a base offense level of 6, adds 18 because the loss falls between $3.5M and $9.5M, adds 2 for more than ten victims, and adds 2 for sophisticated means.
It then subtracts 2 for no criminal history points and, assuming he satisfies the government at allocution, 3 for acceptance of responsibility, reaching level 23 and, in Criminal History Category I, a range of 46 to 57 months.
The US Probation Office recommends 24 months, while the defense wants probation, arguing the harm per artist rounds to nothing.
On the money, $8,091,843.64 is both the agreed loss and the forfeiture sought – the same number twice, which is the government’s point.
“Every penny of loss was diverted to the defendant,” the US Attorney’s Office writes. “Put differently, the actual loss is the same as the defendant’s gain, and while the loss may have been diffuse, the fraudulent proceeds were not – they all went into the defendant’s pocket.
“Moreover, the defendant had full visibility into, and intended, every penny of loss.”
Notably, the letter asks for forfeiture but no restitution, in a filing that has just claimed two offense levels for more than ten victims. That is pro rata’s legal shadow: with dilution spread across every rightsholder streaming that month, there is no victim list to pay back.
How the pattern showed up
Distributors and platforms had flagged Smith as early as 2018, and each time he denied it. But both of the data points the government leans on in its sentencing letter were cohort-level, not track-level.
In April 2023, prosecutors say, the entire Taylor Swift catalog took 9.3 million family-plan streams on YouTube Music, against 80.9 million family-plan streams for Smith‘s, roughly 8.7 times as many.
The MLC found the same signature on the publishing side. In March and April 2023 it halted Smith‘s royalties and put it to him that in October 2021 and October 2022, almost all of Smithhouse Music Publishing‘s Amazon activity had come from family-plan accounts.
We know this because Smith‘s own attorney wrote it down, relaying to the collective that it had called the pattern “statistically improbable” before insisting his client simply used third-party promoters.
On the recording side, Spotify told MBW its systems held his take to about $60,000 of the $10M alleged at indictment, against a streamshare it puts at around 50%.
The letter gives no platform-by-platform breakdown, so where the remaining 99.4% of the $10M alleged at the time was paid is not on the public record.
The rule that would have killed it
Since April 2024, Spotify has required a track to clear 1,000 streams on the service in the prior 12 months before it earns recording royalties at all.
On his own early math – the only configuration he ever wrote down – Smith‘s tracks were running at roughly 805 a year across every platform combined. Had those streams fallen where Spotify‘s own estimate of its streamshare suggests, that is about 400 on the platform the threshold governs. And that is before counting the money the service says it stopped him earning there anyway.
Run the same arithmetic on the fleet at its height, though, and it turns over. 10,000 bot accounts at 636 streams a day is roughly 6.4 million streams daily, or some 7,700 a year per track across 300,000 songs. Apply the same 50% streamshare and that is still a few thousand on Spotify – clear of the bar with room to spare.
So the stream count alone does not finish him; it only forces the choice. The threshold inverts Smith‘s strategy: dispersal stops being cover and becomes disqualification, while concentrating streams to clear the bar walks him back into anomaly range.
Spotify said as much when it announced the policy, arguing it would eliminate a strategy for gaming the system, since “uploaders will no longer be able to generate pennies from an extremely high volume of tracks.”
The second criterion is what closes the door. Spotify also requires an undisclosed minimum of unique listeners per track, which caps how many tracks any bounded fleet of bot accounts can get over the line – and a fleet is always bounded, because every account has to be bought, registered, and paid for.
Two limits remain. Spotify states the threshold does not apply to publishing royalties “for now,” so the pipe The MLC had to close itself stays open.
And the filing’s other signals sit at the account layer, where screening happens at signup rather than at payout: bulk-bought emails, corporate debit cards in invented employee names, cloud and VPN traffic, and near-continuous per-account playback.
Deezer, which reported in January this year that more than 60,000 fully AI-generated tracks reach it daily and that up to 85% of streams on them were fraudulent in 2025, has gone at the content layer instead.
Judge John G. Koeltl will sentence Smith on Tuesday (October 6).
