In money laundering, criminals have a sum of cash that they need to “clean” — they earned it illegally, and they need to make it look like they earned it legally. Insert Spotify’s “fake streams” — where artists use illicit websites to buy “bot streams” which will artificially raise their streams, allowing artists to be paid out by the platform. There are, of course, other reasons for artists to buy fake streams — the largest of which being to appear more popular among listeners. According to season 2 of Vice’s docuseries “Black Market,” artists G-Eazy and French Montana have both been accused of buying streams on Spotify. Here’s how a team of Swedish investigators uncovered a ring of Spotify money launderers.
Through an investigation coordinated by the Swedish police, Spotify has been revealed to be a powerful money laundering vehicle for criminals and gangs. This sophisticated operation involves the orchestrated purchase of counterfeit music streams associated with artists having affiliations with these criminal groups, capitalizing on the artificially generated popularity for unlawful financial gains.
Since the autumn of 2021, analysts from the National Operative Unit of the Swedish Police Force have been closely monitoring the activities of rap artists who distribute their music on the popular streaming platform. Initially, their focus was on extracting insights and leads related to criminal activities from song lyrics. However, as discernible patterns in streaming behavior began to emerge, suspicions arose regarding an alternative purpose behind the criminal utilization of Spotify.
Subsequent to a series of interviews conducted with individuals connected to these networks or possessing inside knowledge regarding efforts against streaming bots, SvD’s investigative team has substantiated the fact that criminal organizations have been exploiting Spotify for money laundering purposes since 2019.
The initial step in this covert operation, according to sources within the criminal network, entailed the procurement of Bitcoin through off-the-record transactions facilitated by a Facebook group. Following this, these criminal factions utilized the cryptocurrency to fund fabricated music streams, often through the use of automated bots, compromised accounts, or other deceitful methods. These clandestine transactions were coordinated through the encrypted messaging application Telegram, leading to the moniker “Telegrambots” for those involved in this clandestine activity.
This relationship between criminal groups and artists appears to be mutually beneficial. As the volume of streams escalates, the popularity of these songs ascends in Spotify’s rankings. This, in turn, attracts genuine listeners, and artists linked to these criminal networks have gone so far as to establish their record labels to exploit this artificially engineered popularity. With genuine streams come actual payouts from Spotify, effectively cleansing the illicit funds and legitimizing their origin. In exchange, numerous of these rap artists attain a semblance of “legitimacy” through their associations with these criminal organizations, with several amassing substantial streams, some even in the tens of millions, on the Spotify platform.
It is noteworthy that not all funds navigate this intricate process without losses. Spotify’s payout structure, which considers factors such as free versus premium accounts and geographic location of listeners, may lead to certain financial deductions. Furthermore, there exists the inherent risk of exposure, as Spotify has intensified its efforts to combat bot streaming and possesses the authority to suspend payments to accounts entangled in illicit activities.
Per sources cited by SvD, this method of money laundering becomes a viable option when dealing with sums surpassing a $75,000 USD.
Earlier this year, Spotify, announced it had contributed $40 billion to the music industry since its inception. Now, the question becomes “How much of that $40 billion came from money laundering?” And more importantly for investors in Spotify, if governments begin to crackdown on Spotify as a tool used for money launderers, will Spotify’s earnings revenues take a hit?