Michael Kratsios, director of the White House Office of Science and Technology Policy, posted on X Wednesday that Beijing-based Moonshot AI had “distilled Anthropic’s Fable for the development of its K3 model,” escalating a monthlong drift toward treating open-weight model releases as export-control events.

Kratsios drew a line between routine distillation, which he called “a vital role in this open innovation ecosystem,” and what he described as “large-scale, covert industrial distillation aimed at stealing proprietary U.S. technology.” Moonshot, he alleged, “developed a sophisticated internal platform to conduct large scale distillation against U.S. models, allowing them to quickly switch between multiple methods of access to avoid detection.” He also accused the company of acquiring Nvidia GB300 servers, and accessing the same hardware in Thailand, “likely to train its AI models.” The GB300 is barred from sale to Chinese firms; the highest-tier chip currently licensed for China is the H200.

Treasury Secretary Scott Bessent posted separately. “Open source is not open season on American IP,” he wrote, adding that “sanctions and Entity List designations will be on the table.” On Fox Business Tuesday, Bessent said the administration was “finding watermarks of our U.S. large language models on many of the Chinese models.”

The technical story is messier than the political one. Kimi K3, released Friday, is a 2.8-trillion-parameter open-weight model. Fable only became publicly available on July 1. Analysts told TechCrunch they doubt a model that size could’ve been built primarily by distilling a base that’s been out for three weeks.

Moonshot didn’t respond to Reuters or TechCrunch. Further Treasury guidance is expected in the coming weeks.

The framing has already done its work. Open-weight releases from Chinese labs are being reclassified, in real time, as evidence of theft rather than competition.

Sources