The FBI, National Security Agency, and Cybersecurity and Infrastructure Security Agency issued a joint report Tuesday accusing Chinese artificial intelligence companies of running “aggressive” and “malicious” campaigns to extract proprietary American AI technology, with the backing of the Chinese government.
The agencies said Chinese firms are “targeting U.S. AI companies to systematically extract proprietary models through knowledge distillation campaigns.”
Distillation is a process in which a smaller AI “student” model learns from a larger, more advanced “teacher” model, sometimes called a frontier model, which represents enormous investments in time, computing power, and money. While distillation is a legitimate development technique in many cases, it can also be used to quietly copy a competitor’s hard-won engineering, similar to reverse-engineering a rival’s product by studying how it behaves.
The government report said Chinese companies have “extracted billions of tokens across millions of exchanges/requests from U.S. frontier AI models, including variants of Claude, GPT, Gemini, and Grok, since at least late 2024.”
“The distillation tactics used by China-based AI companies violate the U.S. companies’ terms of service and shorten AI research development for the China-based companies, undermining fair competition,” the advisory stated.
Echoes an earlier industry warning
The federal report follows a February security disclosure from Anthropic, which accused Chinese firms DeepSeek, Moonshot, and MiniMax of running “industrial-scale campaigns” to “illicitly extract” capabilities from its Claude models.
“These labs generated over 16 million exchanges with Claude through approximately 24,000 fraudulent accounts, in violation of our terms of service and regional access restrictions,” Anthropic said.
Anthropic also warned that AI systems built through this kind of copying may replicate a frontier model’s capabilities without inheriting the safety guardrails designed to prevent misuse — including risks tied to weapons development or cyber-espionage. The new federal report named the same three Chinese companies Anthropic identified, along with additional firms.
Beijing rejects the accusations
China’s Commerce Ministry dismissed the American claims as “groundless” and countered that Washington is attempting to establish a “monopoly” over the global AI industry. The ministry described distillation as a “common practice” and accused the U.S. of unwarranted “anxiety” and applying “double standards.”
“If the U.S. suppresses Chinese AI companies under the pretext of targeting distillation, China will take resolute countermeasures,” the Commerce Ministry said.
Foreign Ministry spokeswoman Mao Ning said Wednesday that China’s AI advances stem from “greater self-reliance and strength in science and technology,” and are driven by what she called China’s commitment to “open cooperation” and “shared benefit.”
“We hope the U.S. side will earnestly act on the important common understandings reached between the two presidents and stop leveling false allegations to smear China,” Mao said.
