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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 · 7d agoAdvisory in the wild1

Label-Guided Knowledge Distillation for 3D-CNNs in Action Recognition

LGKD uses ground-truth labels to guide feature distillation for 3D-CNNs, combining sample-wise and class-wise distillation for action recognition.

The paper proposes Label-Guided Knowledge Distillation (LGKD) for 3D-CNNs, noting that most video feature distillation methods are simple adaptations of image techniques that neglect temporal-dimension differences. LGKD combines sample-wise distillation, which uses label information and the teacher's probability distribution to guide features impacting temporal accuracy, with class-wise distillation employing a prototype network to capture relational knowledge among same-category samples. Experiments on the UCF101 and HMDB51 action recognition benchmarks achieve competitive results.

arXiv cs.AI / cs.LG / cs.CL · 4d agoAI research

Anthropic Says Seven China-Based AI Labs Ran Industrial-Scale Claude Distillation Attacks

Anthropic disrupted industrial-scale unauthorized Claude distillation by seven China-based AI labs, including Alibaba, DeepSeek, Moonshot, and Z.ai.

Anthropic identified and disrupted six illicit distillation campaigns since February 2026 run by seven China-based labs: Alibaba, Moonshot, DeepSeek, Z.ai (Zhipu), MiniMax, Xiaomi, and SenseTime. The largest, GTG-16005, involved 151 million exchanges targeting Claude Opus 4.6/4.7 chain-of-thought transcripts, peaking at roughly 3 million exchanges per day from more than 3,500 fraudulent accounts. Labs used proxy/relay services with fictitious identities, fake or stolen credit cards, harvested API keys, and purchased conversation transcripts from third-party resellers. Anthropic is countering by banning reseller accounts, summarizing internal reasoning before responding, and introducing preserved thinking in Fable 5.1, which encrypts reasoning and prevents context edits before it.

Feds accuse China of ‘systematic’ distillation of U.S. AI models

NSA, CISA, and FBI jointly accuse Chinese AI firms including DeepSeek and Moonshot AI of industrial-scale distillation of US frontier models.

A joint advisory from the NSA, CISA, and FBI alleges China-based AI companies including DeepSeek, Moonshot AI, Alibaba, MiniMax, StepFun, and Z.AI have systematically extracted capabilities from US frontier models since at least late 2024. The companies allegedly spent billions of tokens across millions of requests against Claude, ChatGPT, Gemini, and Grok, routing traffic through multiple accounts, platforms, proxies, and third-party aggregators to evade detection. Moonshot AI allegedly distilled 18 US models, including Anthropic's most advanced model, to train its Kimi-K2 and Kimi K3 models.

CyberScoop · 7d agoAI policy

Y Combinator’s Garry Tan wants U.S. open-weight AI labs to ‘distill’ frontier models, too

Y Combinator CEO Garry Tan urges US open-weight labs to distill frontier models and regulators to stay out, countering Anthropic's crackdown calls.

Y Combinator CEO Garry Tan told CNBC he would "do nothing" about Chinese labs distilling frontier models and floated an "American distillation regime" letting US open-weight labs do the same to American frontier labs. Anthropic this week released its second report alleging Chinese labs conduct "illicit distillation attacks" using hidden identities, fraud, and stolen credentials, and CEO Dario Amodei has called for US regulators to crack down. Tan argued closed labs cannot dictate what customers do with API outputs, noting frontier labs trained on copyrighted material without permission, and called a single monolithic proprietary provider the true AI doomer scenario.

TechCrunch · AI · 4d agoAI industry

Distill Globally, Adapt Locally: Reasoning Distillation and Product-Type Test-Time Training for Scalable Trade-Up Recommendation

A distillation framework compresses LLM reasoning into a 15.5M-parameter trade-up recommendation model reaching AUC 0.941 with product-type test-time training.

The paper targets trade-up recommendation, which identifies higher-quality alternatives that preserve customer purchase intent. A retrieval-augmented few-shot LLM teacher generates labels and rationales that supervise a compact embedding-pair classifier; at inference the 15.5M-parameter student uses only two precomputed 768-dimensional embeddings with no LLM calls. On 8,352 annotated pairs, label-only training scored AUC 0.912, reasoning distillation reached 0.924, and product-type test-time training lifted it to 0.941 with average precision 0.940. The distilled student is roughly 5,000x faster and 10,000x cheaper than direct LLM inference on a 100K-pair proxy catalog.

arXiv cs.AI / cs.LG / cs.CL · 11d agoAI research

Eliciting Weak-to-Strong Generalization with On-Policy Reverse Distillation

OPRD distillation enables weak-to-strong generalization by amplifying verifier-supported policy updates, outperforming existing RL and distillation methods with fewer student updates.

On-Policy Reverse Distillation (OPRD) evaluates a weak teacher's policy shift relative to its reference policy on student rollouts and amplifies the verifier-supported component of the student's policy gradient. This rescaling preserves the stationary points of policy optimization while letting the student learn beyond the teacher's capacity ceiling. In successive model transfer and multi-teacher distillation, OPRD achieves higher performance with fewer student updates than existing RL and distillation approaches, and response-style analysis shows students remain closer to verifier-RL-trained models than to their weak teachers.

Hugging Face daily papers · 8d agoAI research

Verify Before You Distill: Prompt-Level Teacher Gating for On-Policy Distillation

TGOPD verifies teacher reliability per prompt before on-policy distillation, outperforming vanilla OPD across math, code, and instruction benchmarks.

Teacher-Gated On-Policy Distillation (TGOPD) estimates teacher reliability from verifier-scored teacher probes and routes each prompt either to dense on-policy distillation or to verifier-grounded GRPO, avoiding misleading updates from confidently wrong teachers under mode-seeking reverse KL. Across 4B and 35B students in mathematics, code, and instruction following, TGOPD outperforms vanilla OPD in all six single-domain settings and achieves higher seven-benchmark averages under multi-domain training. It also raises teacher-node GPU utilization from 9.8% to 78.9% in the measured 4B single-domain run by reusing idle teacher capacity.

Hugging Face daily papers · 14d agoAI research

CounterPersona: Append-Only Defense Against Unauthorized Persona Skill Distillation

CounterPersona appends targeted counter-persona evidence after data collection to block AI systems from distilling an individual's behavioral patterns into reusable skills.

CounterPersona defends against unauthorized persona skill distillation, where attackers extract recurring patterns from collected personal data to replicate an individual's behavior. Unlike perturbation-based defenses that require modifying data before collection, it works in an append-only setting where historical records cannot be altered or revoked. It constructs targeted counter-persona evidence, packs compatible behavioral states into compact realization units, and strengthens them via rationale-guided consistency rewriting. Experiments show strong effectiveness across lexical, semantic, and LLM-based measures, remaining robust across different distillers.

arXiv cs.CR · 1d agoAI safety & security

US Agencies Warn China Is Systematically Extracting Frontier AI Capabilities

NSA, CISA and FBI warn Chinese AI firms including DeepSeek and Moonshot systematically extracted billions of tokens from US frontier models since late 2024.

The NSA, CISA, and FBI report that China-based AI companies including DeepSeek, Moonshot AI, Alibaba, MiniMax, StepFun, and Z.AI extracted billions of tokens from US frontier models such as Claude, GPT-4/GPT-5, Gemini, and Grok 4 since late 2024. The distillation trained DeepSeek's R1 and V3 and Moonshot's Kimi-K2/K3 models, and the agencies mapped the tactics to MITRE ATLAS while noting additional novel techniques like subscription exploitation and request metadata sanitization. They describe the activity as a strategic economic threat to US technological leadership and recommend behavioral detection, differential privacy, and targeted cost-imposing responses.

SecurityWeekupdated · 4d agofirst · 6d agoAI safety & security in the wild 13 sources1

Mask Forcing: Improving Autoregressive Video Diffusion Distillation via Dual-Noise Masking Rollout

Researchers propose Mask Forcing, a dual-noise masking rollout that mitigates mode collapse in autoregressive video diffusion distillation.

The paper targets over-saturation and over-smoothing in autoregressive video diffusion models distilled via Distribution Matching Distillation, attributed to reverse-KL mode-seeking behavior. Mask Forcing perturbs the student self-rollout with random masks along spatial and temporal axes, injecting cleaner tokens that act as denoising guidance for noisier tokens. Experiments show improved visual quality across multiple distillation methods without using real video data or extra post-training stages.

Hugging Face daily papers · 8d agoAI research

RAPID: A Real-Time Defense Against Unauthorized Model Distillation for Text-to-Image Services

RAPID embeds defensive perturbations in a T2I model's shared VAE decoder to block unauthorized black-box distillation in real time.

The paper defends text-to-image services against model theft via black-box output-based distillation, where adversaries collect prompt-image pairs to train substitute models. RAPID integrates defensive perturbations into the shared VAE decoder using self-referenced latent maximization plus reconstruction-guided color regularization, avoiding costly sample-wise online optimization. Across four T2I models and four datasets versus five baselines, it consistently degrades substitute-model generation quality while preserving visual fidelity.

arXiv cs.CR · 1d agoAI safety & security

Negative Self-Distillation: Learning to Reason by Avoiding Flaws

Researchers propose Negative Self-Distillation (NSD), a label-free LLM self-improvement method that diverges from self-generated flawed reasoning rather than imitating privileged solutions.

The authors show On-Policy Self-Distillation can degrade complex reasoning by forcing imitation of artificially confident traces built on privileged information, suppressing uncertainty and self-correction. NSD instead generates a question-specific negative condition — such as acting as a 'careless reasoner' — and pushes the model's distribution away from it without ground-truth labels. A dynamic gating mechanism isolates reasoning-critical tokens so gradient updates fix behavioral flaws without damaging foundational linguistic capabilities. NSD consistently outperforms OPSD and other label-free, self-bootstrapping reinforcement learning baselines.

Hugging Face daily papers · 6d agoAI research

Pre-Whitening and BCJR Posterior Distillation for Bi-LSTM Detection in Faster-than-Nyquist Signaling

Study shows nested-window Bi-LSTM architectures do not improve faster-than-Nyquist detection; pre-whitening plus BCJR distillation cuts bit error rates.

Across roughly 260 controlled trainings, processing nested intersymbol-interference windows in separate recurrent branches never significantly beat a plain Bi-LSTM at matched parameter budgets. The authors attribute the limitation to the observation model rather than architecture, and instead pre-whiten inputs and distill BCJR soft posteriors into the network. With 3.4% more parameters, the method reaches 1.05x the BCJR bit error rate at compression factor 0.8 and 1.89x at 0.7, improving to 1.47x with a wider whitened window.

arXiv cs.AI / cs.LG / cs.CL · 8d agoAI research

Learning 3D Editing without Paired Supervision via Generative Prior Distillation

New framework distills 2D editing and VLM priors into a feed-forward 3D editing model without paired 3D training data.

The method, PriorEdit3D, learns feed-forward instruction-guided 3D editing by distilling knowledge from foundation models instead of using ground-truth 3D pairs. Through a differentiable rendering pipeline it supervises a 2D visual prior from an image editing model at the main view and a Vision-Language Model semantic prior at novel views for instruction fidelity and identity preservation. A 3D-aware Distribution Matching regularization constrains outputs to the manifold of realistic 3D assets defined by a pretrained image-to-3D teacher. Experiments report superior instruction fidelity and cross-view consistency over state-of-the-art baselines, with code released on GitHub.

Hugging Face daily papers · 12d agoAI research

One Symptom, Three Levers: A Critical Review of On-Policy Self-Distillation

A review paper frames on-policy self-distillation collapse as governed by three levers: token weighting, privileged information, and guidance decay.

The paper critically reviews On-Policy Self-Distillation (OPSD), where a language model trains on its own generations scored token-by-token by a teacher conditioned on privileged information such as reference solutions or environment feedback. It identifies collapse, the progressive narrowing of producible reasoning paths, as the dominant failure mode and analyzes it through three levers: signal weighting, the nature of privileged information, and teacher dynamics. The review is restricted to mathematical reasoning, reports no new experiments, and offers a shared vocabulary separating settled findings from disputed ones.

Hugging Face daily papers · 21d agoAI research

X-AuT: Progressive Audio-Encoder Compression for Speech LLMs with Cross-Scale Distillation

XPeng AI's X-AuT prunes speech LLM audio encoders, cutting Qwen3-ASR-0.6B error from 5.61% to 5.27% with fewer parameters.

X-AuT is a progressive compression framework for speech LLM audio encoders that selects layer combinations via short behavioral probes and restores pruned models using cross-scale distillation and LoRA finetuning while keeping the language-model backbone frozen. Compressing Qwen3-ASR-0.6B from 18 to 16 audio-encoder layers lowered macro-average error from 5.61% to 5.27% on ten Chinese-English benchmarks. A 14-layer model reached 5.75% error with 20.7% fewer audio-tower parameters, and progressive pruning outperformed direct pruning (5.75% vs 6.73%).

Hugging Face daily papers · 6d agoAI research

Ambient @ EgoLongQA 2026: Distilling Long-Video perception into a Sub-2B Model

Ambient team wins EgoLongQA 2026 sub-2B division by distilling an agentic long-video perception pipeline into a 2B vision-language model.

Ambient's entry to the EgoLongQA track of the Wearable-AI Challenge at ECCV 2026 placed first in the <=2B parameter division with 0.8279 on the held-out test set. The system distills the junior perception module of a tool-using agentic pipeline into a 2B student, reaching 89% of the pipeline's accuracy with 1.1% of its parameters and lifting a 27.1% base model to 81.4%. To meet the division limit, the multilingual embedding table is pruned from 248,320 to 143,469 rows, reaching 1.9985B parameters with provably identical logits on retained rows.

Hugging Face daily papers · 6d agoAI research

OracleZoom: On-Policy Self-Distillation Inspired Reference-Constrained Recursive Image Super Resolution

OracleZoom enables recursive extreme-scale image super-resolution via reference-constrained on-policy distillation, reducing hallucinations at deep zoom scales.

OracleZoom tackles recursive super-resolution, where repeated feeding of predictions back into the same model leaves deeper-scale outputs unsupervised as required source resolution grows geometrically. The framework trains on its own trajectory while carrying the last ground-truth evidence beyond the supervision boundary, combining direct and cross-scale supervision, a no-reference quality objective, a KL-constrained pretrained latent prior, and EMA consistency. Across seven datasets it achieves state-of-the-art SR quality across zoom scales, averaging 0.713 CLIPIQA with larger gains at deeper scales and significantly reduced hallucinations. Code, data, and models are publicly released.

Hugging Face daily papers · 10d agoAI research

Safety for Whom? Boundary-Aware Self-Distillation for Controlled LLM Safety Refusal

A self-distillation safety framework tunes narrow-boundary refusals in Qwen3-8B, raising target-domain refusal to 84.75% while cutting over-refusal from 15.20% to 5.20%.

The paper formulates narrow-boundary safety, where deployments need refusals within specific topics rather than whole subjects, and proposes an offline self-generated framework with controlled topic generation, escalating retries, and harmful-benign boundary pairs. On political persuasion with Qwen3-8B, the method raised target-domain refusal from 9.47% to 84.75% and cut the mean unsafe-response rate across three broader benchmarks from 26.26% to 0.14%. Verified target-model responses reduced over-refusal from 15.20% to 5.20%, and boundary-pair data cut comply-side over-refusal on held-out pairs from 32.94% to 4.16%. Results show data composition controls the safety-usability trade-off and alignment should be evaluated on both sides of the refusal boundary.

Hugging Face daily papers · 13d agoAI safety & security1

Making Knowledge Distillation Cheap Enough to Run at Scale

Hugging Face blog by Multiverse Computing describes techniques making knowledge distillation cheap enough for large-scale training.

A Hugging Face blog post from Multiverse Computing (CAI) presents methods for reducing the cost of knowledge distillation so it can be run at scale. The post is aimed at practitioners compressing large models into smaller, cheaper ones for production use.

Hugging Face Blog · Aug 10, 2026AI research

Threat actors are coming for your AI assets to operationalize their use of AI

Google GTIG reports espionage and crime groups stealing AI models, prompts, and API credentials, plus distillation campaigns and agentic AI attack automation.

Google Threat Intelligence Group's quarterly AI Threat Tracker reports adversaries stealing proprietary models, source code, prompts, and API credentials from government, healthcare, and media targets, including China-based UNC6508 compromising clouds to run unauthorized LLM workloads. Distillation campaigns against Google's models exceeded 100 million prompts launched via thousands of stolen account credentials through proxy networks. Mandiant also observed a financially motivated actor deploy an autonomous multi-agent framework that harvested thousands of third-party credentials in under 6 hours, and a 'Recon' framework on a live C2 server managing over 23,000 stolen credentials including cloud and AI API keys.

CSO Online · 13h agoThreat actor in the wild

Opaque recurrence, and other AI terms that you should probably know

TechCrunch updates its plain-English glossary defining common AI terms from AGI and agents to chain-of-thought reasoning.

TechCrunch maintains a regularly updated glossary of AI terminology, defining terms such as AGI, AI agents, API endpoints, chain of thought, coding agents, compute, deep learning, and diffusion. It highlights 'opaque recurrence', the reasoning technique in OpenAI's new Astra model that has drawn attention from AI safety researchers. The piece is an educational living document rather than new research or a product announcement.

TechCrunch · AI · 8d agoAI industry

Lightweight Vision Transformer Compression for On-Device Plant Disease Detection in Resource-Constrained Agricultural Field Conditions

A unified ViT compression pipeline (H-BAC pruning, quantization, distillation) cuts plant-disease models 54.5x to 6.01 MB while keeping 95.13% accuracy.

Researchers combined Hessian-Balanced Adaptive Block Pruning (H-BAC), guided by second-order sensitivity estimation, with quantization and attention-based knowledge distillation to compress Vision Transformers for on-device chilli plant disease detection in India. On a 3-class cross-village, cross-device out-of-distribution dataset, the integrated pipeline reduced model size from 327.42 MB to 6.01 MB (54.5x) at 95.13 +/- 2.32% accuracy, matching the 95.13% FP32 baseline. Ablations also show a directly trained 6.01 MB INT8 student reaches 94.87% accuracy, indicating where pruning and distillation add limited value.

arXiv cs.AI / cs.LG / cs.CL · 11d agoAI research

Viggle/Viggle-Animate — new model trending #28 on Hugging Face

Viggle released Viggle-Animate, a 33.1B MiniMax-H3 finetune replacing video characters from one repainted frame, rendering 124 frames in 26 seconds on one GPU.

Viggle-Animate replaces the character in a video using only a driving video and one of its own repainted frames, with no pose estimator, segmentation mask, face tracker, or text encoder. It is a 33.1B full finetune of MiniMax-H3's ref2va transformer, jointly distilled with DMD across two teachers split by noise level, so rendering takes three forward passes per clip. On a B200 GPU it renders 124 frames in 26 seconds, 6.1x faster per clip than Wan2.2-Animate-14B in matched comparisons. The method assumes no person-specific representation, so it generalizes beyond humans; a demo, research write-up, and ComfyUI nodes are available.

Hugging Face trending models · 15d agoModel release

5 useful things you'll learn in my new post-training textbook (shipping now!)

Nathan Lambert's new RLHF and post-training LLM textbook covers PPO, GRPO, GSPO, CISPO and related techniques, freely available online.

Nathan Lambert's book 'Reinforcement Learning from Human Feedback: Aligning and Post-training LLMs' is now shipping from Manning. It covers policy-gradient algorithms including PPO, GRPO, GSPO, CISPO, and RLOO, plus loss aggregation, truncated importance sampling, asynchronous RL systems, and post-training topics like rejection sampling, outcome reward models, and on-policy distillation. The book is freely available online with a 12-hour course, codebase, and exercises.

Interconnects · Aug 10, 2026AI research

AI lets small actors run state-level hacking campaigns, Anthropic report finds

Anthropic's threat report finds AI let a Russian-aligned espionage campaign, a Chinese student-run exploit foundry and ShinyHunters operators run state-grade operations.

Anthropic's report covering December 2025 to August 2026 details a Russian-aligned espionage campaign by actor 'JackPoterz' — matching Midnight Blizzard behaviors — against more than 20 government and defense organizations across Ukraine and Europe, with AI agents autonomously rebuilding Windows implants to evade detections. Chinese undergraduates ran an automated vulnerability-research foundry using Claude agent swarms, yielding more than a dozen potential zero-days in one month. ShinyHunters-affiliated operators used AI to dump over 2,100 Azure access tokens across 40 corporate tenants in 34 hours. Seven Chinese labs including Alibaba, DeepSeek, Moonshot AI, Xiaomi and Zhipu distilled Claude outputs; Alibaba peaked at nearly 3 million exchanges per day from more than 3,500 fraudulent accounts to train its Qwen systems.

CyberScoop · 5d agoThreat actor in the wild2· 1 read

GTIG AI Threat Tracker: From Prompting to Autonomy – The Evolution of Adversarial AI

GTIG's Q2 2026 tracker shows adversaries adopting agentic AI workflows, including credential harvesting in under six hours and supply chain attacks by UNC6780.

Google Threat Intelligence Group's Q2 2026 report documents adversaries moving from basic prompting to agentic AI workflows and automation, including a cloud compromise followed by agent-enabled mass credential harvesting executed in under six hours. It tracks financially motivated actor UNC6780 (TeamPCP) conducting large-scale open source supply chain compromises across PyPI, npm, and Docker Hub since March 2026, deploying credential stealers. The report also highlights growing targeting of proprietary AI models, source code, prompts, and API credentials, plus LLMJacking practices where adversaries steal developer credentials or hijack cloud infrastructure to run unauthorized AI workloads.

Google Threat Intelligence · 7d agoThreat actor in the wild

OpenBMB Releases MiniCPM5-2B: A 2.52B Dense Model Averaging 53.9 Across 34 Benchmarks and Built to Run On Device

OpenBMB released MiniCPM5-2B, a 2.52B-parameter Apache 2.0 on-device model averaging 53.9 across 34 benchmarks, ahead of Qwen3.5-4B.

OpenBMB released MiniCPM5-2B, a 2,516,756,480-parameter dense LlamaForCausalLM model with grouped-query attention and a 131,072-token context, under Apache 2.0, runnable via vLLM, SGLang, llama.cpp, and Ollama. It averages 53.9 across 34 benchmarks versus 51.1 for Qwen3.5-4B, with strong tool-use (97.1 on tau2-Bench Telecom) and code results (69.1 LiveCodeBench v6, 46.4 SWE-bench Verified). Training combined 400B tokens of deep-thinking SFT, critic-based JustRL II RL teachers, and on-policy distillation merging 16 RL experts; datasets and intermediate checkpoints were published alongside the weights.

MarkTechPost · 8d agoModel release

ReCAST: Restoration-aware Cascaded Stage-wise Training for Obfuscated SMS Risk Classification

ReCAST distills a large teacher model's de-obfuscation ability into smaller models for robust classification of obfuscated Chinese SMS fraud messages.

The paper proposes ReCAST, a restoration-aware cascaded stage-wise training framework for classifying obfuscated Chinese SMS messages. It distills a large teacher model's de-obfuscation capability into a smaller deployable student by supervising obfuscated span detection, obfuscation type prediction, and text restoration, then uses the student for risk classification. On an internally constructed real-world Chinese SMS benchmark, ReCAST substantially outperforms directly trained baselines under obfuscation, targeting production latency and throughput constraints.

arXiv cs.CR · 11d agoResearch