Artificial intelligence (AI) fraud is becoming increasingly common in the modern world, where technology is developing at a rapid pace. AI has a huge potential for positive changes in many areas of life, but its capabilities can also be used for illegal activities. Fraudsters are using AI to create sophisticated fraud schemes, such as fake videos, fake voice recordings, security hacks, and automated mass emails. This makes it difficult to detect such threats and increases the danger to ordinary users. Therefore, it is important to understand these risks and take measures to protect yourself from cybercriminals.

The first criminal case

    The first criminal case related to artificially inflated music streaming. Damian Williams, U.S. Attorney for the Southern District of New York, and Christy Curtis, Acting Assistant Director in Charge of the Federal Bureau of Investigation’s (FBI) New York Field Office, announced the unsealing of a three-count indictment against Michael Smith in connection with a scheme to create hundreds of thousands of songs using AI and use automated programs called “bots” to stream the AI-generated songs. Smith fraudulently received more than $10 million in royalties through his scheme. Michael Smith has been arrested and will appear before a U.S. Magistrate Judge in North Carolina.

U.S. Attorney Damian Williams said: “Michael Smith allegedly fraudulently streamed AI-generated songs billions of times to steal royalties. 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. Today, thanks to the work of the FBI and the office’s top prosecutors, it’s time for Smith to face the music.”

FBI Acting Assistant Director Christy Curtis said: “Michael Smith allegedly created hundreds of thousands of songs using AI and used automated features to stream music repeatedly to generate $10 million in illegal royalties. The defendant’s alleged scheme played on the integrity of the music industry through a concerted attempt to circumvent the policies of streaming platforms. The FBI remains committed to cracking down on those who manipulate cutting-edge technology to make illicit profits and infringe on the genuine artistic talent of others.”

What is alleged in the indictment

   Music can be streamed through music streaming platforms such as Amazon Music, Apple Music, Spotify, and YouTube Music (the “Streaming Platforms”). Each time a song is streamed through one of the Streaming Platforms, the songwriter who composed the song, the musician who performed the song, and in some cases other rights holders are entitled to small royalty payments. Royalty payments are made proportionately to musicians and songwriters, so streaming fraud diverts funds from musicians and songwriters whose songs have been legitimately streamed by real consumers to those who use automation to falsely create the appearance of legitimate streaming.

Smith created thousands of accounts on streaming platforms that he could use to stream songs. Michael Smith then used software to cause the bot accounts to continuously stream songs that Smith owned. At a certain point in time, Smith estimated that he could use the bot accounts to generate approximately 661,440 streams per day, generating annual royalties of $1,207,128.

Smith distributed his automated streams across thousands of songs to avoid abnormal streaming of any single song. Smith realized that if, for example, one song was streamed a billion times, it would raise suspicions among streaming platforms and music distribution companies that these streams were the result of streaming manipulation. However, a billion fake streams distributed among tens of thousands of songs would be harder to detect because each song would be listened to much fewer times. As a result, Smith repeatedly considered the need for more songs to be critical to facilitating the fraud scheme. For example, on December 26, 2018, Smith sent an email to two co-conspirators stating: “We need to get the songs fast so this works around the anti-fraud policy that all these guys are using right now.”

To get the necessary number of songs for his scheme to succeed, Smith eventually turned to artificial intelligence. Around 2018, Smith began working with the CEO of an AI music company (hereinafter referred to as CC-3) and a music promoter (hereinafter referred to as CC-4) to create hundreds of thousands of songs using AI, which Michael Smith could then fraudulently stream. Soon, CC-3 began providing Smith with thousands of songs every week, which Smith could upload to streaming platforms and manipulate the streams. CC-3 eventually provided Smith with hundreds of thousands of artificially intelligent songs for which he could manipulate streams. The CC-3 songs usually had file names that were a random list of letters and numbers, such as “n_7a2b2d74-1621-4385-895d-b1e4af78d860.mp3”.

Michael Smith then created randomly generated song and artist names for the audio files to make it seem like they were created by real artists, not AI. For example, a sequential alphabetical selection of the 25 AI song names Smith used is as follows: “Zygophyceae”, ‘Zygophyllaceae’, ‘Zygophyllum’, ‘Zygopteraceae’, ‘Zygopteris’, ‘Zygopteron’, ‘Zygopterous’, etc.    Similarly, in alphabetical sequential order, the choice of 25 names of AI song “performers” used by SMIT is as follows: “Calliope Bloom”, ‘Calliope Erratum’, ‘Callous’, ‘Callous Humane’, ‘Callous Post’, ‘Callousness’, ‘Calm Baseball’, etc.

Smith made numerous false statements on streaming platforms to facilitate the fraud scheme. For example, Michael repeatedly lied to the streaming platforms when he used false names and other information to create bot accounts and when he agreed to abide by terms and conditions that prohibited streaming manipulation. Michael Smith also deceived the streaming platforms by making it appear that legitimate users were in control of the bot accounts and streaming music, when in fact the bot accounts were hard-coded to stream music.

AI fraud therefore poses a serious threat to the security of users and organizations. The use of AI to create fake data and automate fraudulent activities makes them difficult to detect, making it necessary to increase cybersecurity and awareness of these threats. To combat this type of crime, it is important to improve protection methods, develop ethical standards for the use of AI, and ensure constant monitoring of new forms of attacks. Only coordinated actions by governments, technology companies, and users will reduce the risks of fraud in the AI era.

artificial intelligence / copyright / fraud / intellectual property