US Treasury Threatens Sanctions on China, Claims Its AI Firms Distilled Anthropic's Fable Model
Secretary of the Treasury Scott Bessent at the NATO Summit on July 8, 2026.Credit: NurPhoto
The US Treasury Secretary Scott Bessent has warned China that economic sanctions are on the table for what he describes as "IP theft." He claims that Chinese AI developer Moonshot used improper techniques to train its Kimi K3 AI on Anthropic's Fable model, though others also accuse it of breaching US export controls.
Late last week, Moonshot had what many analysts described as a "DeepSeek moment," in which its latest model proved far more capable than anyone expected, delivering cheaper, more efficient results than some frontier models from Western firms, albeit at a slower pace. Microsoft quickly considered using Kimi K3 for its Copilot, but now the White House is considering banning foreign open-source models entirely, and may even sanction China over its development.
Although model distillation—using smaller models to learn from the outputs of...
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