A YouTube scammer conspiring to run what Billboard described as possibly the largest music royalty scam in history, Jose Teran was recently sentenced by the US government to 70 months in prison.
He was hit with a "significant sentence," US attorney for the District of Arizona, Gary Restaino, wrote in the sentencing memo, because of the "greed and the great lengths" that Teran's scam went over the course of five years to fraudulently claim rights to 50,000 songs. Ultimately, the scam routed $23 million in royalty proceeds away from mostly Latin artists and into the bank accounts of Teran and his co-conspirators.
Teran, the sentencing memo said, "obtained more than $6 million in personal profits" and continued pocketing $190,000 in stolen royalties—which he hid from officials—even after he was indicted for the fraud. Partly because of this, Teran is considered a "high-risk to re-offend," Restaino wrote.
A hefty sentence, Restaino said, was necessary not only to deter Teran from launching future scams—as he plans to remain in the music business and could potentially regain access to further manipulate YouTube's system monitoring royalties. It was also critical to deter people generally from launching similar scams because they might believe that "any potential punishment is worth the payout," Restaino wrote.
Restaino noted that Teran's sentence is at the low end of the recommended sentencing guidelines range but that it was appropriate to address the government's concerns that his sentence "reflects the seriousness of the offense and deters future conduct."
The US government requested a restitution hearing to determine how much should be repaid to victims. A presentencing report set a restitution amount of $1.4 million, but the government is attempting to connect with victims. Because many of the victims reside outside the US, the government is attempting to broaden its public outreach and translate its notification into Spanish to gather more information.
"A future restitution hearing would afford sufficient time for additional victims involved in this case to come forward," a footnote in the sentencing memo said.
Ars could not immediately reach YouTube, lawyers for Teran, or attorneys for the US government for comment.
To scammers, song selection was key
Earlier this year, Teran pleaded guilty to conspiracy, wire fraud, and money laundering, finally admitting that he conspired with Webster Batista Fernandez "to steal royalty payments for approximately 50,000 song titles."
Batista took a plea agreement in April 2022, Billboard reported, revealing "key insights" into how the scam worked, while Teran sought to fight the charges, initially pleading not guilty.
Starting in 2017, Batista and Teran created a record label known as MediaMuv to seize unearned royalties by claiming ownership of songs on YouTube. According to the sentencing memo, they did this by hiring as many as eight employees and searching YouTube "for recorded songs that were not actively monetized."
Once they knew what songs were vulnerable, MediaMuv manipulated YouTube's system that pays music rights holders.
YouTube employs a content management system and Content ID tool to help rights holders identify and collect royalties on sound recordings. According to Billboard, many artists and their teams don't have access to these tools and instead hire third parties to monitor their copyrights and royalty payments. Because of how YouTube's system works, a cottage industry of rights management groups appeared, motivated to get a piece of all those royalty payments.
Among those rights management groups is AdRev, which MediaMuv partnered with to cultivate "a layered façade" and give their stolen 50,000-song library "a greater veneer of credibility," Restaino wrote.
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