US Treasury Secretary Scott Bessent has reiterated that sanctions remain possible against Chinese AI firms, after a White House official accused Moonshot of improperly using distillation to copy Anthropic's Fable model. Model distillation, in which a smaller model learns from a larger one's outputs, is a widely used training technique that can be legitimate but may also amount to intellectual property theft, and Washington is now signalling it will treat suspected cases involving Chinese firms as grounds for sanctions or export blacklisting.

The claim followed remarks by White House science and technology policy chief Michael Kratsios, who alleged Moonshot had used Nvidia's export-restricted GB300 servers, including some accessed in Thailand, potentially breaching US export controls. Moonshot's Kimi K3 model, released as open-weight last week, has unsettled the AI industry with its capabilities, though some experts question whether it could have been built mainly through distillation from Fable, which only launched publicly on 1 July. The row has fuelled a wider Washington debate, with figures such as OpenAI's Dean Ball arguing the US should restrict Chinese open-weight models to protect its technological lead; both Moonshot and the Treasury have yet to respond to requests for comment.