US Treasury warns of possible sanctions over AI model copying claims

In short: The US Treasury said sanctions could be used if Chinese AI companies are found to have copied US AI models.

What happened

US Treasury Secretary Scott Bessent said the US government may impose sanctions on Chinese AI companies if it finds they stole intellectual property, meaning protected ideas and work.

His comments came after a White House official, Michael Kratsios, accused the China-based company Moonshot of improperly using a technique called model distillation. Model distillation is when a smaller AI system learns by studying the answers from a larger AI system (like a student copying an answer key to learn faster). The claim is that Moonshot used this approach to build its Kimi K3 model based on Anthropic’s Fable model.

Bessent wrote on X that “open source is not open season on American IP,” and warned that “sanctions and Entity List designations will be on the table” if firms cross the line into theft. The Entity List is a US government list that can restrict what companies are allowed to buy from US businesses.

Kratsios also alleged Moonshot obtained or accessed Nvidia GB300 servers, which are high-end computers used to train AI. These systems are part of Nvidia’s Blackwell line and are banned from being sold to Chinese companies. Some experts questioned whether Kimi K3 could mainly come from distilling Fable, since Fable has only been publicly available since July 1.

Why it matters

This dispute could affect what AI tools and models are available to companies and developers, and it could tighten rules around using open models from China. It also shows how AI is becoming a policy issue, not just a tech one, because it involves trade limits, copyright, and national security.

Source: TechCrunch AI