How Did Two Unknown Operators Of Latin Music Earn $23 Million From YouTube? The IRS Asserts It Was Stolen

Jose “Chenel” Medina Teran was driving a lime-green Lamborghini Aventador through West Phoenix. The flashy sports car, which costs more than $390,000, was frequently seen parked in front of pubs, restaurants, and even Walmart. It acted as a sort of tracking mechanism for Teran’s whereabouts as well as a visible reminder of his unexpected, astounding wealth for locals. “You could tell where he ate by where he parked,” recalls Ricardo, a successful Arizona City entrepreneur in the flourishing Latin music sector.

Teran’s transformation from middle-class comfort to Lamborghini-level luxury came as a surprise to people who knew him as the owner of a local recording studio, engineer, and music producer. They felt the same way about his business partner, Webster “Yenddi” Batista Fernandez, who was born in the Dominican Republic. Batista, like Teran, progressed from being a local bachata artist and music video director to owning a Lamborghini — albeit a very subtle gray one — and wearing diamond-encrusted chains designed by Bad Bunny’s current jeweler, El Russo.

Ricardo, who worked in the Phoenix music industry, was bewildered as to why Teran and Batista were now living so lavishly. Phoenix is a major hub for drug trafficking. “My first idea was, ‘Oh, they’re doing that,’ or maybe they won the jackpot and don’t want everyone to know,” Ricardo recalls. It just didn’t make logic to me.

Teran and Batista, according to the government, perpetrated one of the largest – if not the largest – known YouTube music royalty schemes in history, prompting an IRS investigation and their arrest in November 2021 on 30 counts of conspiracy, wire fraud, money laundering, and aggravated identity theft.

Teran and Batista (along with a number of suspected partners), according to filings filed in federal court in Arizona, formed MediaMuv to drain about $23 million in master and publishing royalties for Latin music copyrights they did not own over a four-year period. The majority of these revenues were collected by AdRev, a well-known rights management organization owned by Downtown Music Holdings. Teran pled not guilty, according to his attorney, and will face trial in November. Requests for comment were not returned. On the other hand, on April 21, Batista accepted a plea deal in which he admitted guilt to one count of wire fraud and one count of conspiracy. As part of the plea agreement, he provided critical information to the court about the MediaMuv scheme. Because the inquiry is still underway, Batista’s attorney and an IRS spokeswoman declined to comment.

The ‘Pirate Hotspot’

A criminal mastermind is not necessary to deprive music composers of their proper recompense, according to Batista’s plea deal. Similar schemes to MediaMuv’s are well-known among those in the music industry who work in digital rights management, according to multiple industry sources, but Teran and Batista’s scheme was particularly brazen, both in terms of the tens of millions of dollars the IRS claims they stole from Latin acts and in terms of the manner in which they allegedly committed the theft.

Larger rights holders, such as labels, publishers, and multichannel networks, can handle royalty collection and metadata for their musical copyrights using YouTube’s content management system (CMS), or “content manager,” and its Content ID tool, which recognizes matching sound recordings. According to Jeff Price, the founder of TuneCore, a global distributor and music publishing administrator, Audiam, a rights management company, and Word Collections, a global copyright administration company, these scams happen all the time in every industry, on every service, and even within music rights collection agencies around the world. “The mechanism they designed allows for greater openness and the prospect of identifying and possibly resolving problems on YouTube as they arise.”

During YouTube’s infancy, a cottage industry of rights management firms such as AdRev arose to suit the needs of rights holders who had direct access to YouTube’s capabilities. These companies have CMS and Material ID access and specialize in collecting royalties and policing material for independent artists, labels, and publishers looking to outsource the time-consuming chore of copyright maintenance. Despite the fact that a directory of rights management organizations is included in YouTube’s creator support material, sources indicate that many copyright holders are unaware of these third parties or prefer not to use them.