A top White House official is escalating the fight over Moonshot AI's viral Kimi K3 model

White House Office of Science and Technology Policy Director Michael Kratsios publicly accused Moonshot AI of distilling Anthropic's Fable model to develop its viral Kimi K3 model, calling the large-scale covert distillation an unacceptable theft of U.S. technology. Kratsios stressed that legitimate distillation is vital but that Moonshot's actions undermine American research, as Kimi K3 performs at or above the level of Anthropic and OpenAI's leading frontier models despite being freely available.

A top White House official publicly accused Moonshot AI of essentially stealing from Anthropic, intensifying the debate over China-based open source AI models. "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. We have information that Moonshot AI distilled Anthropic’s Fable for the development of its K3 model. — Director Michael Kratsios @mkratsios47 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… July 22, 2026 Kratsios said Moonshot AI, the maker 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 https://www.businessinsider.com/kimi-k3-ai-model-moonshot-investors-alibaba-cloud-tencent-stock-2026-7 is widely regarded as the most impressive open source AI model released thus far. 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 US 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 by itself https://www.businessinsider.com/distillation-problem-ai-industry-anthropic-openai-2026-7 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." Kratsios' statement comes after Treasury Secretary Scott Bessent suggested that the US government may sanction Chinese companies https://www.businessinsider.com/treasury-secretary-chinese-ai-open-source-sanctions-kimi-k3-2026-7 if it is proven that their models were improperly trained through a process called distillation. The White House's words so far are notable, as they mark a rare instance in which the Trump administration does not find itself at loggerheads 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. Increasingly, US companies have said that their Chinese competitors have abused the process to rip off 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.