White House Raises Moonshot Anthropic Fable Distillation Allegations, Treasury Warns of Sanctions

U.S. Treasury Secretary Scott Bessent reaffirmed the possibility of sanctions following White House allegations that Chinese AI company Moonshot illegally distilled Anthropic's Fable model. Bessent said "open source doesn't mean you can take U.S. IP however you want," and stated that if large-scale distillation attacks are determined to be IP infringement, sanctions and Entity List designation would be considered.

White House Office of Science and Technology Policy Director Michael Kratsios claimed that Moonshot obtained export-restricted Nvidia GB300 servers via Thailand and other locations and used them to train its AI models. The GB300 is part of Nvidia's Blackwell-generation servers, whose sale to Chinese companies is prohibited.

Some experts question the claim that Moonshot's Kimi K3 was primarily developed through Fable distillation, pointing out that Fable was only released on July 1. Kimi K3 was released last week as an open-weight model, and its high performance is raising questions about the massive capital investment models of major U.S. AI labs.

The incident has also sparked debate in Washington over the influx of Chinese-made open models. Dean Ball, a former White House AI advisor and current head of strategy and foresight at OpenAI, argued that the use of Chinese open-weight models should be restricted or banned to protect America's technological edge.