Mike Smith, a businessman and former urgent-care facility owner, was indicted in September 2024 on federal fraud charges related to music streaming. Prosecutors allege Smith generated over $10 million through a scheme involving fake streams, marking the first such criminal prosecution in the United States.
Alleged Fraudulent Activities
Between 2017 and 2024, Smith is accused of employing a system that used fake email addresses to create bot accounts on streaming platforms. These accounts allegedly played his music on repeat. In October 2017, internal calculations by Smith reportedly indicated that 1,040 accounts were streaming approximately 636 songs daily, totaling around 661,440 streams per day. At an average royalty of half a cent per stream, Smith estimated daily earnings of $3,307.20, monthly earnings of $99,216, and annual earnings exceeding $1.2 million.
Furthermore, the indictment states Smith eventually scaled his operation to include up to 10,000 active bot accounts. To circumvent anti-fraud policies, he allegedly acquired and uploaded hundreds of thousands of songs generated with artificial intelligence, spreading the fake streams across a vast catalog.
Music Career and Prior Legal Issues
Prior to the indictment, Smith pursued a career in music, achieving charting success in 2017 with "You're My Kind of Beautiful," which peaked at Number 35 on Billboard's adult-contemporary chart. He utilized his business wealth to fund various music projects, including collaborations with notable artists and the production of the reality competition show "One Shot" for BET.
Public records indicate Smith previously faced accusations of Medicare and Medicaid fraud between 2015 and 2016, settling one case in 2020 for $900,000. Allegations included claims that his medical network paid $150,000 to his music label, SMH Records.
Industry Response and Impact
The prosecution of Smith highlights a growing concern over streaming fraud within the music industry. Studies estimate that fraudulent streams account for 1-10% of all streams globally, potentially leading to annual royalty losses of $510 million to $3 billion. The "streamshare" model, where subscription and ad revenues are pooled and distributed based on an artist's share of total streams, means that bot activity reduces the royalty pool for legitimate artists.
In 2018, Smith's music was flagged for potential fraud by a distribution company. In 2023, the Mechanical Licensing Collective (MLC), a nonprofit tracking digital publishing royalties, confronted Smith about the allegations and halted royalty payments. While Spotify reported paying Smith approximately $60,000 and Pandora $1,500, other channels, possibly including Tidal, may have distributed larger sums. Industry observers note vulnerabilities in the streaming ecosystem, as various entities in the payment chain may have incentives that do not fully align with fraud prevention.
Legal Status
Smith has pleaded not guilty to the charges. His trial is scheduled to commence on October 6. If convicted, he faces a maximum sentence of 60 years in prison.