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China-Based Artificial Intelligence Companies Conducting Industrial-Scale Distillation Campaigns Against U.S. AI Companies

NSA, CISA, and FBI warn DeepSeek, Alibaba, and other Chinese AI firms ran industrial-scale distillation of U.S. frontier models, threatening U.S. AI leadership.

A joint NSA, CISA, and FBI Cybersecurity Advisory (AA26-251A) says China-based firms DeepSeek, Moonshot AI, Alibaba, MiniMax, StepFun, and Z.AI extracted billions of tokens from U.S. frontier models including Claude, GPT, Gemini, and Grok, likely with Chinese government knowledge. Campaigns running since at least late 2024 used native APIs, cloud providers, third-party aggregators, gray-market proxy "transfer stations", and shared premium subscriptions to bypass geographic restrictions, evade safeguards, and violate providers' terms of use. The agencies recommend detecting anomalous prompts, accounts, and usage patterns; subtly altering responses to suspected distillers; and cross-organization intelligence sharing. They also call DeepSeek's publicly cited $5.6M training cost misleading because it excludes data acquired through distillation.

CISA Advisories · 8d agoAdvisory in the wild1

Water sector passes, government sector fails attempts to spot and halt simulated CISA attack

CISA red teamers compromised both a government and a water organization; water defenders detected and contained the simulated attack, government defenders did not.

CISA's red team gained initial access, elevated domain privileges, and lateral movement into sensitive business systems and cloud resources at an unnamed government organization, whose SOC ignored low- and medium-severity EDR alerts buried under thousands of false positives. A water organization's SOC quarantined phishing-compromised workstations within 2, 10, and 20 minutes, and later detected and isolated intrusions reaching the OT DMZ bastion host. Both organizations underestimated cloud risk, lacked Microsoft Conditional Access for workload identities, and had no process to revoke compromised access and refresh tokens. This is one of CISA's rare public red-team reports since 2023.

CyberScoop · 22d agoAdvisory1

AI-fueled attacks pose ‘active threat’ to water, other sectors, U.S. agencies warn

NSA, CISA, FBI, DOE and EPA warn hackers are using AI-generated scripts to actively attack Siemens S7 PLCs across critical-infrastructure sectors.

A joint cybersecurity advisory from the NSA, CISA, FBI, Department of Energy and EPA warns of an active threat campaign targeting water, food, energy, chemical, manufacturing and commercial facilities via Siemens S7 Series programmable logic controllers. The actors use internet scanning to find exposed or poorly protected PLCs, then deploy AI-generated exploitation scripts disguised as legitimate monitoring tools, an OT first that dramatically lowers the expertise required for ICS attacks. Siemens says no new S7 vulnerabilities are involved, only exploitation of misconfigurations, and it is coordinating with CISA's ProductCERT. The warning follows a joint FBI-EPA advisory confirming attacks at water and wastewater utilities in at least 12 states since July 27.

CyberScoop · 27d agoAdvisory in the wild1