Trending on Billboard
A North Carolina musician has pled guilty to stealing $8 million in royalties with fake streams on AI-generated music in the first-ever criminal streaming fraud case brought by U.S. prosecutors.
Michael Smith, 54, copped to one count of wire fraud conspiracy on Thursday (March 19) in New York federal court. He agreed to forfeit his $8 million in streaming fraud proceeds and faces up to five years in prison.
“Michael Smith generated thousands of fake songs using artificial intelligence and then streamed those fake songs billions of times,” said Manhattan’s top federal prosecutor, U.S. Attorney Jay Clayton, in a statement Thursday. “Although the songs and listeners were fake, the millions of dollars Smith stole was real. Millions of dollars in royalties that Smith diverted from real, deserving artists and rights holders. Smith’s…
MANAGEMENT & CULTURE (THE “TONE AT THE TOP”)
Fraud thrives in “sloppy” environments where leadership ignores the rules.
- The Fraud Triangle: For fraud to occur, three elements must be present: Pressure (the need for money), Rationalization (thinking “I deserve this”), and Opportunity (weak controls). You can only control the Opportunity.
- Whistleblower Hotline: Provide an anonymous way for staff to report “odd behavior.” Most internal frauds are caught via tips, not audits.
- Background Checks: Conduct credit and criminal record checks for all employees in financial or data-sensitive roles.
- Annual Ethics Training: Make sure every staff member knows that the company has a Zero Tolerance policy toward “borrowing” from petty cash or fudging overtime.