White House OSTP Director Michael Kratsios says “we have information that Moonshot AI distilled Anthropic's Fable for the development of its K3 model”

We have information that Moonshot AI distilled Anthropic's Fable for the development of its K3 model. To do this they developed a sophisticated internal platform to conduct large scale distillation against U.S. models, allowing them to quickly switch between multiple methods of

@mkratsios47 2026-07-22 Director Michael Kratsios

Context & Ripple Effects

The allegation turns the White House’s earlier warning about industrial-scale distillation by foreign entities into a named case involving Moonshot AI and Anthropic. It also follows a same-day report that Moonshot had obtained or accessed GB300-equipped computing capacity, linking model-development concerns to AI infrastructure access.

For Anthropic, the claim arrives as its Fable family has been subject to sustained testing and deployment controls, including post-red-team traffic restrictions on Mythos-class models. The administration is increasingly treating frontier-model capability, access, and provenance as connected policy issues.

First-order effects

Moonshot AI faces a public U.S. government accusation that its K3 development used distillation of Anthropic’s Fable, raising immediate reputational and compliance pressure around its model-development practices.
Anthropic gains a high-level public validation of concerns about unauthorized extraction of frontier-model capabilities, while the White House establishes a specific company as the focus of its prior warnings.

Second-order effects

The accusation may push U.S. model developers to tighten monitoring, access controls, and evidence collection around large-scale querying patterns associated with distillation.
Cloud, chip, and infrastructure providers serving cross-border AI workloads could face stronger pressure to distinguish legitimate model use from activity that supports unauthorized capability replication.

Third-order effects

If U.S. agencies continue moving from general warnings to named allegations, model provenance and anti-distillation safeguards could become a more explicit part of AI trade, infrastructure, and procurement policy.
The episode points toward a frontier-AI market in which competitive advantage depends not only on training capacity, but also on whether governments regard a lab’s model supply chain and capability acquisition as acceptable.

The trend: Frontier AI is being recast as a state-mediated strategic asset, with model distillation, compute access, and national policy increasingly assessed together.

Discussion

NewsMax.com NewsMax.com on x
US Accuses China's Moonshot of Stealing From Anthropic's Fable for Latest AI Model
@kimmonismus @kimmonismus on x
This reads to me as if preparations are being made to ban models like Kimi K3 in the future. I would be very interested in the evidence that leads to the assumption that Fable 5 was distilled for Kimi K3.
@steve_yegge Steve Yegge on x
When are people going to figure out that intelligence can't be contained? It's been leaking for millennia, it's going to keep leaking at an exponential rate, and there's nothing you can do about it.
@tekbog @tekbog on x
soon the great firewalls will be put up and a shadow token economy will be born welcome to cyber warfare
@matthewstoller Matt Stoller on x
Anthropic ‘distilled’ millions of copyrighted books without asking. They knowingly used pirated materials for training. The entire U.S. ecosystem of AI is based on similar theft and extraction. But it's unfair when China does it to us? Grow up.
@sophiacai99 Sophia Cai on x
Instead of banning Chinese AI models by putting them on a Commerce entities list, the Trump administration is zeroing in on Chinese models being “distilled” from — or copying — U.S. models. Bessent yesterday floated sanctions.
@matthewberman Matthew Berman on x
1. Didn't we know this? 2. The data distilled from Ant was not enough to make the model as good as it is. 3. Why can't Fable detect and prevent distillation attacks? 4. This seems like a losing battle, let's just go all-in on building our own (US) AI.
@arielkwiat Ariel on x
US cope is starting to exceed even the European cope-producing facilities. Truly outstanding.
@kchoudhu @kchoudhu on x
“They paid for Anthropic for API access and used it”
@haider1 Haider on x
@mkratsios47 we have information that Anthropic distilled humanity's entire internet for the development of Fable 5
@matthew_sigel @matthew_sigel on x
Frontier labs entire business model is built on “distilling” the entire history of human creativity and intelligence, no?
@cmuratori Casey Muratori on x
When AI companies pirate something*, it's “fair use”. When someone pirates their model data, it's “stealing” and “undermining American research”. * - Literally pirate. Multiple court admissions have made clear that AI companies download millions of works from pirate sites.
@chrisrmcguire Chris McGuire on x
Incredibly strong statement by @mkratsios47 showing how China is continuing to illicitly distill its AI models from US models and illegally access U.S. chips. Excellent the administration is so focused on this. The question again is: when is this going to translate into action?
@aphysicist Aaron Slodov on x
maybe one day china will actually make a better model from the ground up, prob not, but maybe!
@hunterwalk.com @hunterwalk.com on bluesky
even if true, doesn't matter. — Anything that can be distilled will be distilled. [embedded post]
@fry69.dev @fry69.dev on bluesky
That is simply impossible! — It takes months to train a model! — Fable was not available during that time where the main training run for K3 must have happened! — Also it takes ENORMOUS amount of data to train a model! — Way more that it is possible to siphon from an API …
@daniloc.xyz @daniloc.xyz on bluesky
I saw Goody Proctor distilling with Fable [embedded post]
@xinyu2ml Xinyu Yang on x
While others write stories, we're busy writing code. Getting our models ready to open-source for the world. Stay tuned.
@eliebakouch Elie on x
(even if they did it)* i personally have 0 information about whether they did it or not, i'm just saying that even if they had some distillation pipeline for prompts or judge, i'm having a hard time thinking that this would significantly boost performance in this very short
@peterwildeford Peter Wildeford on x
The US government accuses Kimi K3 of being developed with... - sophisticated large-scale distillation of Anthropic's Fable model - use of Nvidia compute procured in violation of US export controls - legal use of remote compute in Thailand 👀
@eliebakouch Elie on x
there are only 15 days between fable 5 ban removal and kimi K3 release. i don't think claiming that K3's performance comes from fable distillation (even if they did it) makes sense technically
@teknium @teknium on x
I have information that Anthropic scraped my github twitter reddit discord and facebook posts for the development of it's Fable model. To do this they developed a sophisticated internal platform to conduct large scale scraping and obfuscation of their actions.
@bubbleboi Bubble Boi on x
Isn't going to college like literally distilling from your professors? What's the big deal.
@danprimack Dan Primack on x
“They used my stuff without permission.” “Whatever. That's just distillation.” — “China used my stuff without permission.” “Thieves!!!!!”
@ednewtonrex Ed Newton-Rex on x
We have information that Anthropic distilled millions of creatives' work for the development of its Fable model. To do this they developed a sophisticated internal platform to conduct large scale training on U.S. copyrighted work, allowing them to quickly train on millions of
@ednewtonrex Ed Newton-Rex on x
If AI training is just like human learning (as the AI bros love to tell us), why should Chinese AI companies not learn from US AI companies' outputs?
@andrewcurran_ Andrew Curran on x
Scott Bessent alluded to this yesterday and specifically mentioned sanctions. It's possible they may be gearing up to use Kimi as a test case for new penalties. US-China AI talks are planned for September, with Bessent leading the US side. Things are heating up. [image]
@curtis_yarvin Curtis Yarvin on x
Solution: no wires to China. Great Firewall facing inward. Trade still legal but must be conducted by clipper ship. Sail power only
@hamandcheese Samuel Hammond on x
We urgently need to pass the Chip Security Act to enforce location verification of our advanced chip exports. By all means sanction adversarial distillation, but allowing China to illicitly or surreptitiously access racks of Hoppers and Blackwells is the far bigger own-goal.
@undersece @undersece on x
This is more than a heist of invaluable American Intellectual Property. It is an assault on every economy that prizes the entrepreneur, rewards private capital, and relies on fair and honest competition. Lying, cheating, and stealing is not innovation or “win-win”. It's
@yacinemtb Kache on x
@mkratsios47 I don't remember letting anthropic scrape my GitHub profile as well as all of my online writing!
@nathancgy4 Nathan Chen on x
every day rn i go on x to learn something new about this company
@martin_casado @martin_casado on x
Very sensible position provided the allegations are true.
@micsolana Mike Solana on x
what's wrong, you don't like the free market?* *american startups competing against the second wealthiest nation state in human history, which is presently committed, from the top down, to destabilizing our industry and cornering the global intelligence market
@jack_raines Jack Raines on x
Wait til you figure out what the frontier labs trained on!
@dkaushik96 Divyansh Kaushik on x
Important to note that BIS could address the remote access issue today if it wanted to.
@dougcalidas Doug Calidas on x
Hard to see how anyone can look at this and reach the conclusion that the US needs to double-down on accelerating release of frontier models to “beat China.” Absent the release of US frontier models, Chinese developers like Moonshot have nothing to distill. This seems so
@rakeshsfnyc Rakesh Agrawal on x
The funniest thing here is that he thinks the president will (or is capable of) reading a document this long. He wouldn't have the attention span to read the tl;dr.
@kevinbankston Kevin Bankston on x
I'd be curious to understand what IP is being stolen? According to your (C) office, LLM outputs aren't copyrightable, and courts have long held reverse engineering to be a fair use; trade secret is a stretch since the company's model is directly disclosing the info. Easy to say
@krishnanrohit Rohit on x
Jun 9: Fable's out Jun 12: Fable revoked Jul 1: Fable's back with stronger classifiers Jul 15: Kimi's out
@sarahkheck Sarah Heck on x
Thanks @mkratsios47 for speaking out on this important issue. Illicit, adversarial distillation is IP theft and industrial espionage that supports adversary military and intelligence capabilities. It is a national challenge that creates serious national security risks for the
@chrisgpt Chris on x
Kimi K3 was already in internal evaluation by April/May, before Fable 5 had been available long enough to be a plausibly distilled. I'll wait for the evidence from the USG if they'll publish it. However Kimi already outperformed Fable on BrowserComp, so if K3.1 beats Fable 5 on […
@krishnanrohit Rohit on x
Could this be true re the scale? Fable was barely out for any time before it was shut down and Kimi came out.
@ryangreenblatt Ryan Greenblatt on x
Many people seem to be arguing this is implausible because Fable hasn't been out for long. But Moonshot could have obtained unauthorized access before Fable was released via actors with prerelease access (Glasswing) or possibly by hacking Anthropic directly.
@secscottbessent Treasury Secretary Scott Bessent on x
We support open-source AI and the innovation it unlocks. But open source is not open season on American IP. 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.
@emollick Ethan Mollick on x
I have no inside information, but every sign so far is that there is growing tension about open weights models between the US & China: the US announcing that they reserve the right to act against distilled models, then saying Kimi distills. Contradictory reports from China, etc.
@phl43 Philippe Lemoine on x
I think concerns about distillation from US models by Chinese companies are legitimate, although nobody really knows how much it actually matters, but it's kind of funny to see a US official complain that a Chinese company has violated export controls on chips and, in the same
@kimmonismus @kimmonismus on x
„sanctions and Entity List designations will be on the table." Yeah, bans on Chinese open source are coming. Pretty sure at this point. If Scott Bessent, who pushed through similar measures against Anthropic, raises this as a possibility, we know where things are headed.
@taylorlorenz Taylor Lorenz on x
Suddenly we have to protect the AI companies— who commit 24/7 IP theft and have built their businesses on IP theft— from IP theft? Lmao
@kevinsxu Kevin S. Xu on x
As of today's America, an AI model's output or chain of thought is not copyrighted nor treated as trade secrets. So it is not IP. You may *feel* like it is because of something you've read. But it isn't. Thus, alleging distillation as “IP theft” is not a serious legal
@randyxian Randy on x
yes, Fable went public on July 1 and K3 launched on July 15. We trained a brand new frontier model in JUST 15 DAYS. Guinness World Record stuff.
@tekbog @tekbog on x
oai and ant just want regulation and to keep the lead, they are winners already and IPOs coming soon but they don't see that instead of trying to keep the piece of pie you control you can simply expand the pie so you get a bigger piece, everyone gets a bigger piece
r/singularity r on reddit
Nvidia CEO, Jensen Huang says Wall Street is “misunderstanding Kimi again,” argues American companies should absolutely be allowed to use Chinese AI models.
r/artificial r on reddit
Nvidia's Jensen Huang defends Chinese AI amid Kimi panic
@kevinbankston Kevin Bankston on x
This seems like a poorly tailored content- and speaker-based restriction on speech. And while Chinese company Moonshot may not have a direct 1st amendment right to publish its weights and outputs, we in the US likely have a 1st am right to receive them.
@parkerconrad Parker Conrad on x
A set of politically-connected growth investors are mobilizing to protect their bag in Anthropic. They will secure bans on chinese open source models, when no crime has been proven—or even alleged—and without any act of congress. All to protect a set of wealthy investors.
@ramez Ramez Naam on x
Yup. The federal government signalling that they'll sanction Moonshot and make it hard for Americans to use Kimi, the lowest cost frontier AI model and de facto best cyber defense model. Foreign adversaries & hackers will still be able to use it, of course. But maybe not you.
@stocksavvyshay Shay Boloor on x
$NVDA CEO Jensen Huang says Wall Street misunderstood DeepSeek and is “misunderstanding Kimi again.” He argues open Chinese models shouldn't be banned because cheaper open models accelerate AI adoption making “free AI” bullish for chips, data centers & Nvidia's compute demand. [v…
@benbajarin Ben Bajarin on x
People will soon find out open models need more compute/memory/networking, etc than closed models. So even if open models become dominant compute still up and the right.
@jimcramer Jim Cramer on x
We must NOT let our companies use these Chinese models to save a few bucks. OpenAI and Anthropic are correct. This is vital national security. Please read Bing West's just released Cat 5. I respect the Chinese people greatly but these companies are run by the PLA for heaven's
@joshua_saxe Joshua Saxe on x
1) It's going to be extremely hard to stop AI companies from training on each other's model outputs from a technical POV because ... *the model behaviors are the product the model companies are selling* and you don't need that many of them to get leveraged gains in posttraining
@stevesi Steven Sinofsky on x
This makes me sad. It always makes me sad to see tech companies in litigation in general and in IP litigation specifically. This compounds when any company seeks to do so under the cover of using the whole of government, trade law, and claims of spying. Treating/calling model
r/MU_Stock r on reddit
White House accuses China's Moonshot AI of distilling Anthropic's Fable to develop Kimi K3.

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