It's not a loophole, though. Their ToS specifically prohibits creating artificial streams. The guy isn't going to get away with it. The AI generated music isn't a problem, but spinning up bots to give it streams is the same as using click bots to farm ad revenue. If the man catches you, the man's gonna win.
Vulfpeck made a silent album and asked fans to stream it nonstop. THAT was a loophole, because there wasn't anything spotify could do, there wasn't anything in their agreement that said they couldn't do that, and that's awesome. Spotify (and the others I assume) has since plugged that hole, but I applaud them for taking advantage while they could.
Yeah, I have to think there are others out there doing this same thing at a smaller scale, being more subtle about it, and not getting caught. This guy just got a bit too greedy.
ToS was the wrong term. Artists agree to a contract when they monetize their content on Spotify. The contract specifies exactly what the artist will be paid for. If the artist was misrepresenting facts in order to be paid more than the contract would otherwise stipulate, it's called fraud, and that is a crime.
Artificial streams are not new. Spotify has many articles dedicated to describing the problem of artificial streams, and the penalties for artists engaging in it. Here are One, Two, Three of them just from a single search.
This is a loophole in the same way that taking stuff when the owner isn't looking is a loophole. In other words, it's just called a crime.
You're not entering a contract with those people, let alone being paid. If you believe you're getting paid in an untracable way, your govt would like a word with you.
I don't know why you think the company got played, did you read the article? Dude is busted. Best case, they're going to garnish his income for the rest of his life.