U.S. Treasury Secretary Scott Bessent is sounding the alarm on Chinese AI firms, warning that sanctions are imminent if they engage in covert, industrial-scale model distillation—potentially IP theft—from American models like Anthropic’s Fable. He emphasized that “open source is not open season on American IP,” and the Treasury is now actively scrutinizing Chinese open-source models. The controversy erupted after accusations that Moonshot’s new Kimi K3 model may have been distilled from Fable, raising alarms about national security, innovation, and the sustainability of U.S. AI labs. Experts are now debating whether to restrict or ban Chinese models to protect America’s tech edge, as the race to AI supremacy heats up with high stakes and blurred ethical lines.
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