# Streaming Fraud Scheme Details

> Michael Smith sentenced for $8M music streaming fraud using bot accounts.
- Title: Streaming Fraud Scheme Details · Music Business Worldwide
- Summary: Michael Smith sentenced for $8M music streaming fraud using bot accounts. Michael Smith faces 46 months in prison for orchestrating a bot scheme that…
- Keywords: michael smith, spotify, mlc, streaming fraud, bot accounts, pro rata, us attorney, federal court, streaming royalties, music business, digital mechanicals, spotify threshold
- Source: Music Business Worldwide — https://musicbusinessworldwide.com/an-8m-streaming-fraud-two-plays-a-day-heres-the-pro-rata-math-behind-the-bot-scheme-and-the-rule-change-that-would-have-killed-it
- Published: 2026-10-02T16:42:39+00:00
- Read time: 1 min
- Topics: michael smith, spotify, mlc, streaming fraud, bot accounts, pro rata, us attorney, federal court, streaming royalties, music business, digital mechanicals, spotify threshold
## First criminal case
Michael Smith is due to be sentenced in Manhattan federal court on Tuesday, October 6, 2026.
## Plea agreement
Smith pleaded guilty on March 19, 2026 to a single count of conspiracy to commit wire fraud under 18 U.S.C. § 371.
## Reduced charges
The plea replaced three counts from September 2024 that carried 60 years between them.
## Prosecution request
Prosecutors are asking for at least 46 months in prison for Smith.
## Pro rata model
Streaming services use pro rata to allocate revenue from streams without fixed per-stream pricing.
## Fraud mechanism
Fake streams dilute real streams by shrinking each track’s revenue share across the pool.
## Two pipes
Sound royalties flow to labels via Spotify; publishing royalties go to PROs through The Mechanical Licensing Collective.
## Bot setup
Smith used 52 cloud accounts with 20 bot accounts each for 1,040 total bot accounts.
## Daily streams
Each bot account streamed 636 songs daily, totaling 661,440 streams per day.
## Half-cent rate
At 0.5 cents per stream, Smith’s monthly earnings were $99,216 and annual earnings $1,207,128.
## Two plays a day
Smith’s scheme spread 661,440 daily streams across 300,000 tracks, averaging two plays per track per day.
## Why 46 months
The government claims Smith caused $8.09M in losses, leading to a 46-month prison sentence.
## Spotify threshold
Spotify requires 1,000 streams in the prior 12 months before earning royalties for a track.
## Rule change impact
Smith’s scheme would have been caught by Spotify’s threshold as tracks averaged 805 streams per year.
## Key takeaway

Michael Smith faces 46 months in prison for orchestrating a bot scheme that generated $8.09M in fraudulent streaming revenue across 300,000 tracks.