Senior White House official Michael Kratsios, Donald Trump’s Assistant for Science and Technology, accused China’s Moonshot AI of creating its Kimi K3 model by distilling Anthropic’s Fable. Kimi K3 is a 2.8-trillion-parameter open-weights model released on July 16, after which US AI stocks sank. Kratsios alleged in a Xeet that Moonshot AI “developed a sophisticated internal platform to conduct large scale distillation against U.S. models” and gained access to servers packing Nvidia’s GB300 accelerator, a model the US does not allow to be sold in China, including GB300s running in Thailand. He stated the USA “strongly supports the free and fair development of AI” but called “large-scale, covert industrial distillation aimed at stealing proprietary U.S. technology” unacceptable. US Treasury Secretary Scott Bessent wrote in a Xeet, “We support open-source AI,” but added, “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.” Anthropic accused Moonshot AI of distillation in February 2026 and said its Chinese peers DeepSeek and MiniMax also used the technique.