FBI, NSA warn Chinese AI companies like DeepSeek and Alibaba are reportedly carrying out 'industrial-scale' distillation campaigns to boost their models

Date:
Wed, 09 Sep 2026 15:05:00 +0000

Description:
US AI companies should implement additional mitigations to curb these attempts, agencies warn.

FULL STORY ======================================================================Copy link Facebook X Whatsapp Reddit Pinterest Flipboard Threads Email Share this article 0 Join the conversation Follow us Add us as a preferred source on Google Newsletter Subscribe to our newsletter CISA, NSA, FBI warn Chinese AI firms of industrialscale knowledge distillation Companies like DeepSeek, Moonshot, Alibaba allegedly extracted billions of tokens from US frontier models Advisory urges detection of malicious prompts, deceptive responses to distillation, and crossprovider intelligence sharing Chinese AI companies
core development strategy is to steal proprietary functionalities and capabilities from their US counterparts, law enforcement agencies have
warned.

The US Cybersecurity and Infrastructure Security Agency (CISA) has published
a new security advisory, drafted jointly with the National Security Agency (NSA) and the Federal Bureau of Investigation (FBI), warning American AI companies about an ongoing aggressive, malicious, and targeted distillation activities at an industrial scale, and sharing recommended mitigation steps. Knowledge distillation IBM defines knowledge distillation as a machine learning technique that aims to transfer the learnings of a large pre-trained model, the teacher model, to a smaller student model. It is used in deep learning as a form of model compression and knowledge transfer, it added, particularly for massive deep neural networks. Latest Videos From TechRadar Watch full video here:

So, knowledge distillation is not illegal or malicious, per se. Its goal is
to train a more compact model to mimic a larger, more complex one. In the security advisory, the agencies stress it is recognized as a legitimate and useful technique in AI research, but add that China-based AI companies are using it in ill will.

In other words, the agencies claim that instead of spending months and millions developing new capabilities for their models, the Chinese are simply sending huge numbers of carefully designed questions to US models and extracting the answers. You may like Chinese military reportedly uses
American AI models to train its defense systems China cracks down on Western models while US companies flock to DeepSeek Anthropic's allegation that Alibaba copied Claude has huge implications Which companies are engaged in knowledge distillation? Apparently, all companies worth anything. DeepSeek, Moonshot AI, Alibaba, MiniMax, StepFun, and Z.AI all allegedly extracted billions of tokens across millions of exchanges/requests from US frontier AI models, including variants of Claude, GPT, Gemini, and Grok, since at least late 2024. CISA also stressed that this was likely done with the awareness of the Chinese government. It hasnt outright said, with its blessing, although
it could be read between the lines.

The advisory shares a thorough list of all the models that were being
trained, as well as all the models being taken advantage of. Are you a pro? Subscribe to our newsletter Sign up to the TechRadar Pro newsletter to get
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On the Chinese side, they include DeepSeek R1 and V3 models, Moonshots
Kimi-K2 and Kimi-K3 models, and MiniMaxs M2 model. On the US side, they start with earlier models such as GPT-4, Claude 3.7, and Gemini 2.5 Flash Preview, all the way to Claude Fable 5, GPT-5, and similar.

When done in good faith, knowledge distillation is not illegal. However, the report says the companies routed the requests through multiple accounts, different API access points, multiple cloud providers, third-party AI aggregators, proxy services and transfer stations, as well as premium subscriptions shared between developers, all in an attempt to work around defenders trying to disrupt the process.

This represents systematic extraction of proprietary functionalities and capabilities threatening U.S. technological leadership. Addressing industrial-scale distillation merits a coordinated response across the AI ecosystem, including effective information-sharing, spanning the U.S. Government, private industry, and allied nations, the agencies concluded.
What to read next Nvidia and others warn about dangers of premature restrictions on AI models In a twist of irony, a Chinese open source GLM 5.2 AI model contained 'rogue' OpenAI GPT-5.6 Sol in a Hugging Face hack just as the US mulls banning open-weight AI Why AI is a matter of national security What US companies should be doing To defend their intellectual property (and thus remain ahead of Chinese competing models) US AI companies should implement comprehensive detection and mitigation, the agencies said. That means hunting for anomalous and malicious prompts, accounts, networks, and behaviors. Furthermore, they should monitor subscription-to-usage ratios, immediate maximum usage from new accounts, and enterprise-scale throughput patterns.

The second step is to deploy targeted response changes: Subtly alter
responses for suspected malicious distillation attempts to attenuate the payoffs to companies conducting industrial-scale distillation campaigns. In other words, AI companies should make sure their products lie when they spot they were being distilled for knowledge.

Finally, US AI firms should set up cross-organization intelligence sharing, correlating activity across model providers, cloud platforms, and API aggregators. The best antivirus for all budgets Our top picks, based on real-world testing and comparisons

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