Which DSPs Paid Out $10 Million+ to Alleged Fraudster Michael Smith? Spotify, Pandora, and (Probably) SoundCloud Say They’re Off the Hook

An over $10 million question: Which DSPs made material payments in the alleged years-long fake stream scheme purportedly orchestrated by Michael Smith? Photo Credit: Simone Secci

Billions of fake streams and millions in allegedly stolen royalties later, many questions remain about the federal case against accused fraudster Michael Smith. Perhaps the biggest of all: Which DSPs failed to flag – and consequently paid into – the years-long scheme?

At least according to the indictment, that scheme saw Smith make off with north of $10 million in fraudulent royalties between 2017 and 2024. Behind the sizable sum, the defendant allegedly used bots to stream “hundreds of thousands of” AI songs.

The machine-generated recordings’ titles didn’t scream “hit” – ever heard of “Zyme Bedewing”? – and were attached to “artist” profiles like “Calorie Event” and “Camalus Disen,” per the indictment.

Apparently, the gibberish titles and the exclusive reliance on AI didn’t raise red flags throughout the entire streaming world. In an age when most tracks are failing to crack 1,000 annual streams – to the financial detriment of the involved talent – how did some services let the alleged scam and its billions of plays run unimpeded?

Given AI’s growing prevalence, that’s another multimillion-dollar question with massive implications for the music industry. While we won’t arrive at an answer overnight – the case itself is still navigating through choppy discovery waters – there’s nothing stopping us from peeling back the streaming fraud onion layer by layer.

In this spirit, we got the ball rolling by asking on-demand music platforms point blank about their contributions to Smith’s alleged scam. We’re still awaiting responses from several DSPs, and one can certainly argue that silence will ultimately prove more telling than straight answers.

An important note here: The indictment specifically mentioned Amazon Music, Apple Music, Spotify, and YouTube Music, but the alleged scheme’s tracks made their way onto even more platforms than that. Though they’ve long since been removed, of course, the uploads also reached SoundCloud, Africa’s Boomplay, and multiple others, lingering “artist” profiles show.

Getting down to it, then, Spotify previously told DMN it’d paid less than 1% of the $10 million in allegedly fraudulent royalties described in the indictment.

“Spotify invests heavily in automated and manual reviews to prevent, detect, and mitigate the impact of artificial streaming on our platform,” a spokesperson told DMN. “In this case, it appears that our preventative measures worked and limited the royalties Smith was able to generate from Spotify to approximately $60,000 of the $10,000,000 noted in the indictment.

“As Spotify typically accounts for around 50% of streamshare, this shows how effective we are at limiting the impact of artificial streaming on our platform,” the rep proceeded.

Like we’ve noted in prior coverage, that Spotify seems to have stopped the alleged scam – on its own service – presents additional questions yet about communications (or the lack thereof) with the MLC, distributors, and more.

But we’ll dive into the multifaceted topic another time. As things stand, SiriusXM told us that Pandora had contributed even less than Spotify to the alleged scam.

“Pandora’s estimated royalty exposure for tracks relating to the indictment in question was $1,500.00, underscoring the speed and effectiveness of our preventative measures,” a SiriusXM spokesperson told us.

“We have several measures in place, leveraging AI machine learning and other technologies, to identify and filter behavior to prevent data disruption and inaccuracies,” the company continued.

“We use conservative thresholds that monitor for multiple types of behaviors in violation of our terms of service at the listener level, and in our continued efforts to combat attempted fraud we regularly evolve our methods of identifying both anomalous streamed tracks and listeners.”

Next, SoundCloud opted against disclosing its cumulative payout to Smith – while directing us back to a September 2024 statement touting the fan-powered model as a means of preventing fraud.

“In a pooled royalties model, it’s easy to game the system with vanity accounts that exist to blindly play certain tracks over and over, commonly supported by bots,” SoundCloud said. “In contrast, fan-powered royalties tie royalties directly to the contributions made by real listeners.

“Fan-powered royalties are attributable only to listeners’ subscription revenue and ads consumed, then distributed among only the artists’ listeners streamed that month. No pooled royalties mean bots have little influence, which leads to more money being paid out on legitimate fan activity,” the platform proceeded.

With those clarifications, we can cross Spotify, Pandora, and presumably SoundCloud off the list of possible payers into Smith’s alleged scheme. And needless to say, we’ll provide further updates as other responses come in – or fail to arrive.

Meanwhile, we’re also teeing up updates exploring, among different things, Smith’s alleged co-conspirators as well as separate instances of alleged streaming fraud. If a $10 million alleged royalty scam can go (partially) undetected for years, it’s safe to say DSPs are hardly impervious to smaller-scale efforts to boost uploads via non-organic listening.

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