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Threat Intelligence & APT CyberScoop 1 month ago

Feds accuse China of ‘systematic’ distillation of U.S. AI models

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CyberNew Threat Research Desk
• Original Reporting: CyberScoop
CyberNew Threat Intel Assessment
Assessed Severity: INFORMATIONAL
Impacted Surface
Enterprise Perimeter & Network Defense
Intelligence Sector
Threat Intelligence & APT

Analyst Takeaway

"The U.S. government is accusing Chinese AI companies of engaging in a deliberate and “systematic” effort to illegally distill U.S. frontier AI models and their capabilities. According to a joint cybersecurity advisory from the National Security Agency, the Cybersecurity and Infrastructure Security Agency and the FBI, the sheer scale of these efforts since 2024 indicate that distillation is a..."

Recommended Defense & Mitigation

  • Threat Monitoring: Ingest published IOCs into SIEM/EDR detection rules for continuous telemetry monitoring.
  • Security Awareness: Alert staff and maintain baseline endpoint hardening across endpoints.
Curated & Verified by CyberNew Threat Intelligence Desk Standard Defense Framework (NIST / MITRE ATT&CK)

 The U.S. government is accusing Chinese AI companies of engaging in a deliberate and “systematic” effort to illegally distill U.S. frontier AI models and their capabilities. 

According to a joint cybersecurity advisory from the National Security Agency, the Cybersecurity and Infrastructure Security Agency and the FBI, the sheer scale of these efforts since 2024 indicate that distillation is a critical part of China’s AI industrial policy.

“China-based artificial intelligence companies are conducting systematic extraction of proprietary functionalities and capabilities of U.S. AI companies’ models through industrial-scale knowledge distillation campaigns that form the core—not merely a supplement—of their AI development strategy,” the agencies wrote. 

The advisory names Chinese companies like DeepSeek, Moonshot AI, Alibaba, MiniMax, StepFun, and Z.AI, saying they spent billions of tokens across millions of exchanges and requests with frontier U.S. AI models like Anthropic’s Claude, OpenAI’s ChatGPT, Google Gemini, and xAI’s Grok, since at least late 2024.

The U.S. agencies said the companies used data culled from these interactions to strengthen their own domestic models, a practice that is tacitly encouraged but not directed by political leaders in Beijing.

DeepSeek, for example, distilled frontier U.S. models to generate synthetic training data for its R1 and R3 models, including four different versions of Claude, two versions of Gemini, five versions of ChatGPT and Grok 4. Those models helped train DeepSeek’s capabilities in areas like agentic functioning, question and answer optimization, creative and occupational writing and others.

Another Chinese company, Moonshot AI, allegedly distilled 18 different U.S. models – including Fable 5, Anthropic’s current, most advanced commercially available model – to train its Kimi-K2 and Kimi K3 models. The company used millions of queries meant to extract enhanced capabilities in areas like agentic reasoning, coding and data analysis, computer vision, larger logical frameworks, visual processing and others.

Chinese AI companies manage a sophisticated set of tools and systems that route requests and prompts through multiple pathways to avoid detection.

Source Verification & Original Intelligence

This threat report was reviewed by CyberNew analysts and cross-referenced with primary security disclosures from CyberScoop.

Primary Advisory →