--- format: "aidr-story-markdown/v1" id: "40e958a70c9dbd149598dfdbe58e8dd94abc029ae5fa43d4b57bee0a80dffe82" canonical_url: "https://aidr.today/40e958a7?lang=en" title: "US Treasury Secretary Labels Chinese AI Model Distillation as Theft" lang: "en" requested_lang: "en" available_langs: ["en","vi"] translation_fallback: null fallback_fields: [] published_at: "2026-10-03T13:11:24.000Z" category: "Regulation" topics: ["openai","llm"] source_urls: ["https://huggingnews.com/ai/update-us-treasury-secretary-labels-chinese-ai-model-distillation-as-the-887284b2","https://x.com/wallstengine/status/2105344923235160433","https://x.com/FirstSquawk/status/2106367078311617011","https://x.com/FirstSquawk/status/2105349602488865122","https://x.com/JSchaeff3r/status/2105356987630543057","https://x.com/JSchaeff3r/status/2105357204836471248","https://x.com/natolambert/status/2105351603444420995","https://x.com/pashmerepat/status/2105525388239884670"] summary: "Treasury Secretary Bessent told Axios that firms in China are employing \"industrial distillation\" to misappropriate intelligence and capabilities from artificial intelligence models created by American companies. Bessent specifically named Moonshot AI's Kimi chatbot as a powerful model that \"thinks she is Claude\" and claimed the system once sent People's Liberation Army weapons plans back to Anthropic. This government condemnation follows a period where Bessent observed China becoming more aware of the utility of open source models over the past 60 days. The escalating dispute stems from a campaign OpenAI disrupted that began July 1 to extract protected reasoning from its GPT models. OpenAI attributed a core cluster of the activity to individuals associated with Moonshot AI, recording 16,000 extraction attempts from over 4,000 users during a peak on July 24 and 25. Operators manipulated model interactions to reproduce hidden reasoning without breaking encryption or breaching databases. While OpenAI closed the replay pathway on its direct services, a September 13 audit showed the vulnerability persisted for models hosted on Microsoft Azure." --- # US Treasury Secretary Labels Chinese AI Model Distillation as Theft > [Open the canonical story]() **Published:** 2026-10-03T13:11:24.000Z **Category:** Regulation **Topics:** openai, llm ## Summary Treasury Secretary Bessent told Axios that firms in China are employing "industrial distillation" to misappropriate intelligence and capabilities from artificial intelligence models created by American companies\. Bessent specifically named Moonshot AI's Kimi chatbot as a powerful model that "thinks she is Claude" and claimed the system once sent People's Liberation Army weapons plans back to Anthropic\. This government condemnation follows a period where Bessent observed China becoming more aware of the utility of open source models over the past 60 days\. The escalating dispute stems from a campaign OpenAI disrupted that began July 1 to extract protected reasoning from its GPT models\. OpenAI attributed a core cluster of the activity to individuals associated with Moonshot AI, recording 16,000 extraction attempts from over 4,000 users during a peak on July 24 and 25\. Operators manipulated model interactions to reproduce hidden reasoning without breaking encryption or breaching databases\. While OpenAI closed the replay pathway on its direct services, a September 13 audit showed the vulnerability persisted for models hosted on Microsoft Azure\. ## Sources - [Story source]() - [Story source]() - [Supporting source]() - [Supporting source]() - [Supporting source]() - [Supporting source]() - [Supporting source]() - [Supporting source]()