Treasury threatens sanctions after White House claims Moonshot distilled Anthropic’s Fable

U.S. Treasury and White House officials are threatening sanctions against a Chinese AI company after accusing it of improperly copying a U.S. AI model through a technique called distillation, where a smaller model learns from a larger one's outputs. Model distillation is a common and legitimate AI training method, but can infringe on intellectual property rights when done without permission. The accusation has intensified broader debate in Washington about Chinese AI models and whether the U.S. should restrict them to protect American technological advantage and national security.