The Trump Administration Raises Accusations Against Moonshot AI
The Trump administration has leveled serious accusations at the Chinese AI startup Moonshot AI, asserting that the company utilized Anthropic’s Claude Fable 5 model in developing its Kimi K3.
This report dissects the ramifications of these allegations on the artificial intelligence sector.
Michael Kratsios, Director of the White House Office of Science and Technology Policy, contended that Moonshot AI “developed a sophisticated internal platform for large-scale distillation of U.S. models.”
Treasury Secretary Scott Bessent warned that sanctions may be forthcoming for developers found guilty of appropriating U.S. intellectual property.
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A spokesperson from the Chinese embassy, Liu Chang, swiftly dismissed the allegations as “pure slander.”
However, experts within the AI domain are scrutinizing the technical feasibility of executing distillation in a mere 15 days, the interval between the re-launch of Fable 5 and the introduction of Kimi K3.
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…
— Director Michael Kratsios (@mkratsios47) July 22, 2026
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Furthermore, Kratsios elucidated that Moonshot AI “acquired servers equipped with GB300 and gained access to GB300 in Thailand, likely for training its AI models.”
He delineated a distinction between legitimate distillation and the alleged industrial extraction of U.S. model capabilities.
While the appropriate application of this method fosters an open innovation ecosystem, the indictment of large-scale covert operations remains intolerable.
Bessent informed Fox Business that U.S. authorities are discovering “watermarks” in Chinese models, potentially signifying the usage of outputs derived from U.S. large language models.
“If we see foreign models stealing technology from our major companies, we possess the capability to impose sanctions on them,” he remarked.
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.
— Treasury Secretary Scott Bessent (@SecScottBessent) July 22, 2026
Moreover, U.S. Trade Representative Jamieson Greer indicated that the administration is scrutinizing whether China is employing unfair tactics to bolster its dominance in the global AI race.
In response, Chinese embassy spokesman Liu Chang firmly rejected the accusations, deeming them a blatant attempt to “discredit China’s AI industry achievements.”
He reaffirmed China’s commitment to intellectual property safeguards, persistently denying such claims amid a call for evidence.
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Anthropic unveiled Claude Fable 5 on June 9. Following this, the U.S. government instituted export limitations on June 12, prompting Anthropic to suspend access.
After the restrictions were lifted on June 30, the company reinstated global access on July 1. Subsequently, Moonshot AI introduced Kimi K3 on July 16—merely 15 days after Fable 5’s reopening.
There are only 15 days between Fable 5’s ban removal and Kimi K3 release. I don’t think claiming that K3’s performance comes from Fable distillation makes sense technically even if they did it https://t.co/RQB8h07Qxo
— elie (@eliebakouch) July 22, 2026
Researcher Eli Bakush from Prime Intellect remarked that such a truncated timeline complicates the narrative regarding Kimi K3’s performance, even if distillation were utilized.
Dean Ball, Head of Strategic Futures at OpenAI, concurred, emphasizing that Kimi K3’s quality could not be attributed solely to distillation.
Furthermore, an image circulated purportedly showing the Chinese model identifying itself as Claude, yet its authenticity remains unverified.
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