Treasury threatens sanctions after White House claims Moonshot distilled Anthropic’s Fable

U.S. Treasury Secretary Scott Bessent reiterated that sanctions are on the table for Chinese AI companies after a White House official accused Moonshot of improperly distilling Anthropic’s Fable model. This distillation process, while common in AI training, can infringe on intellectual property rights. Bessent emphasized that covert distillation attacks that amount to IP theft could lead to sanctions. The allegations include Moonshot's acquisition of Nvidia's banned GB300 servers, raising concerns over compliance with U.S. export-control rules. The release of Moonshot's K3 model as an open-weight model has further intensified debates about the implications for U.S. AI firms.