White House science advisor Michael Kratsios accused Moonshot AI of copying Anthropic’s Fable large language model to build Kimi K3. The accusation centers on the allegation that the Chinese company used large-scale distillation to replicate proprietary U.S. technology.

Moonshot AI unveiled Kimi K3, which is the largest available open-weight large language model. The system contains 2.8 trillion parameters.

He stated that Moonshot AI distilled Anthropic’s Fable for the development of its K3 model. Kratsios described the process as a deliberate effort to bypass the extensive research and development costs associated with creating foundational models from scratch.

"Large-scale, covert industrial distillation aimed at stealing proprietary U.S. technology and undermining American research is unacceptable," Kratsios said. He framed the release of Kimi K3 not as an independent technological breakthrough but as the result of unauthorized access to American intellectual property.

He stated that Moonshot AI acquired servers containing Nvidia GB300 AI chips. The acquisition of this hardware is central to the administration’s case, as it suggests the company secured processing power necessary for training large models despite export restrictions. He stated that Moonshot AI accessed GB300-equipped servers in Thailand, likely to train its AI models. Nvidia GB300 chips are banned from export to China.

Treasury Secretary Scott Bessent stated that watermarks of U.S. large language models are found on many Chinese models. The presence of these digital signatures serves as technical evidence for officials who argue that Chinese firms are relying on replicated U.S. code rather than original development.

"We are finding watermarks of our U.S. large language models on many of the Chinese models, and that that’s unacceptable," Bessent said. He indicated that the government is actively monitoring model outputs to identify instances of potential intellectual property theft. He stated that sanctions and Entity List designations will be considered for PRC firms conducting covert, industrial-scale distillation attacks that constitute IP theft.

"When PRC firms conduct covert, industrial-scale distillation attacks that cross the line into IP theft, sanctions and Entity List designations will be on the table," he said. The Treasury Secretary’s remarks outline a specific policy response to companies that officials believe are violating U.S. intellectual property rights.

Braden Hancock, a researcher at the Laude Institute and co-founder of Snorkel AI, questioned the timeline of the alleged distillation. He noted that the speed of Kimi K3’s development is inconsistent with the time required to process and train on the source data.

"I don’t think you get a model this strong and this quickly on the heels of Fable doing strictly distillation," Hancock said. His assessment suggests that technical factors may complicate the government’s narrative that the model was built solely through replication.

"Fable’s only been publicly available since July 1st. You can’t distill that much data, train a model, and release it in two weeks," Hancock said. He pointed to the short window between the availability of the source model and the release of Kimi K3 as evidence of independent engineering work.

One of the founders of Moonshot was a Carnegie Mellon University PhD student. This educational background links the company’s leadership to the U.S. academic system, where they gained expertise in artificial intelligence before returning to China to establish their firm.

Elon Musk testified that SpaceXAI distilled OpenAI models to develop Grok. This testimony establishes that distillation is a recognized practice within the U.S. technology sector, used by major companies to accelerate their own model development.

Musk testified that model distillation is common in the AI industry. The widespread use of the technique complicates efforts to define it strictly as theft, as it is a standard method for improving model efficiency and performance.

The Remote Access Security Act passed the House of Representatives in January. The legislation aims to close loopholes that allow foreign entities to access restricted U.S. technology through remote cloud services rather than physical hardware exports.

The Remote Access Security Act seeks to expand U.S. export controls to include remote cloud-based access of critical hardware and software. By targeting cloud access, the bill addresses the method allegedly used by Moonshot AI to train its models on banned chips located in Thailand.

The Remote Access Security Act is awaiting action in the Senate. Its passage would provide a legal framework for restricting the type of remote computing access that officials say enabled the development of Kimi K3.