White House OSTP Director Kratsios accuses Moonshot AI of large-scale distillation to steal US AI tech

A top White House official has publicly accused China-based Moonshot AI of essentially stealing from Anthropic, escalating the debate over open source AI models developed in China.

Official Allegations

"We have information that Moonshot AI distilled Anthropic's Fable for the development of its K3 model," Michael Kratsios, director of the White House Office of Science and Technology Policy, wrote on X Wednesday morning.

Kratsios stated that Moonshot AI, the creator of the viral Kimi K3 model, went to great lengths to conceal its actions.

"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 access to avoid detection," he wrote.

Kimi K3's Performance and Release

Kimi K3 is widely regarded as the most impressive open source AI model released to date. Moonshot's model has performed at or above the level of Anthropic and OpenAI's leading frontier models in benchmark testing. It is likely that both U.S. companies spent billions developing those models.

In contrast, Moonshot is expected to make Kimi K3 freely available for download on local devices and customizable to a user's content when it releases the model's full weights next week.

Distillation: A Nuanced Issue

Distillation by itself is not wrong, a point that Kratsios stressed in his statement. AI labs themselves use the process of training a less powerful model on the output of a more powerful model before releasing updates.

"Legitimate AI distillation used to create smaller, more efficient models plays a vital role in this open innovation ecosystem," he wrote. "However, large-scale, covert industrial distillation aimed at stealing proprietary U.S. technology and undermining American research is unacceptable."

Broader Context

Kratsios' statement comes after Treasury Secretary Scott Bessent suggested that the U.S. government may sanction Chinese companies if it is proven that their models were improperly trained through distillation.

The White House's remarks are notable, as they mark a rare instance in which the Trump administration does not find itself at odds with Anthropic. The Trump administration previously imposed export controls to block Anthropic from releasing Fable 5, its most advanced model, and in February the Pentagon moved to blacklist the AI giant.

Industry Concerns

Increasingly, U.S. companies have said that their Chinese competitors have abused the distillation process to steal their intellectual property. In February, Anthropic publicly accused three companies, including Moonshot AI, of using distillation attacks that violate its terms of service.

A spokesperson for Anthropic did not immediately respond to a request for comment from Business Insider.