US agencies accuse six Chinese AI firms of industrial-scale distillation of American models

The National Security Agency, the Cybersecurity and Infrastructure Security Agency, and the FBI published a joint advisory on Tuesday titled "China-Based Artificial Intelligence Companies Conducting Industrial-Scale Distillation Campaigns Against U.S. AI Companies." It names DeepSeek, Moonshot AI, Alibaba, MiniMax, StepFun, and Z.AI as having extracted billions of tokens through millions of requests to U.S. frontier models, including variants of Claude, GPT, Gemini, and Grok, since at least late 2024. Knowledge distillation trains a cheaper model on the outputs of a more capable one. The agencies say the Chinese firms used it at industrial scale to extract restricted capabilities such as reasoning and coding, and that it forms "the core, not merely a supplement" of their strategy. They assess the activity likely occurred with the knowledge of the Chinese government. According to CyberScoop, the advisory describes systems that route millions of requests across different accounts and platforms. It lists company-level detail: DeepSeek is described as running organized campaigns against Claude, Gemini, GPT, and Grok models to help train R1 and V3, and Moonshot AI is said to have pulled millions of exchanges from Claude and GPT for its Kimi models from mid-2025. The advisory also states that DeepSeek's widely cited $5.6 million training cost excludes the cost of data obtained through malicious distillation. CISA Acting Director Nick Andersen urged AI companies to "take immediate steps to safeguard their platforms against knowledge distillation campaigns."