White House Accuses China of Running an Industrial-Scale Operation to Copy US AI Models

White House Office of Science and Technology Policy director Michael Kratsios circulated a memo on April 23 accusing Chinese entities of conducting deliberate, industrial-scale campaigns to distil and steal US frontier AI systems, using tens of thousands of proxy accounts and jailbreaking techniques, days before a scheduled Trump-Xi summit.

White House OSTP director Michael Kratsios circulated a memo to US government agencies on April 23 stating that foreign entities “principally based in China” are “engaged in deliberate, industrial-scale campaigns to distil US frontier AI systems.” The accusation represents the most formal and direct statement the Trump administration has made about Chinese AI intellectual property theft from American laboratories and arrives days before a scheduled Trump-Xi summit.

White House China AI Theft Accusation Names Distillation as the Attack Vector

Distillation is the technical process by which smaller AI models are trained on the outputs of larger, proprietary ones, allowing a lab to approximate frontier performance without paying the full training cost associated with building from scratch. According to the Kratsios memo, Chinese actors are using tens of thousands of proxy accounts to make large-scale queries to American AI systems, evading the rate limits and detection systems that companies have built to flag suspicious usage patterns. Jailbreaking techniques are then applied to strip safety filters and expose the proprietary behavior of models, which is captured as training data for distilled copies. Both OpenAI and Anthropic have previously accused DeepSeek publicly of distilling their models. The Financial Times reported that the memo is addressed to US government agencies and signals that the administration will begin sharing intelligence about active distillation campaigns directly with US AI companies. As crypto.news reported, Nvidia CEO Jensen Huang had warned days earlier that China possesses ghost datacenters with enormous computing infrastructure capable of matching US frontier AI capabilities.

DeepSeek’s V4 Launch Sharpened the Timing of the Accusation

DeepSeek released preview versions of its V4 model on April 24, built to run on Huawei’s Ascend chips, one day after the Kratsios memo surfaced. Chinese rivals Zhipu AI and MiniMax fell 9% and 7% respectively on the V4 launch day, reading the release as a competitive threat. DeepSeek has denied allegations of illegal use of synthetic training data, insisting its data is collected through organic web searches. The Chinese Embassy in Washington called the White House accusations “baseless” and said Beijing “attaches great importance to the protection of intellectual property rights.” The Foreign Ministry urged Washington to “abandon biases.” As crypto.news documented, US AI companies including Nvidia, Microsoft, and Meta have been navigating compounding geopolitical exposure to China throughout 2026, with the IRGC designation of American tech companies as targets earlier in April adding a second layer of pressure on top of the theft accusations.

What the Administration Has Said It Will Do

The memo says the administration will share intelligence about distillation campaigns with American AI companies and “explore a range of measures to hold foreign actors accountable.” Separately, Commerce Secretary Howard Lutnick confirmed on April 23 that no Nvidia advanced AI chip shipments had actually cleared through to China despite the conditional January approval, adding a chip supply dimension to a dispute already being fought at the model and data levels. The question of whether the Trump-Xi summit scheduled for the coming days will address AI intellectual property directly is being watched closely by industry executives, given that both the distillation accusations and the chip supply dispute are now active points of contention between the two governments. As crypto.news tracked, Nvidia’s revenue has already been materially affected by the chip export restriction tightening that escalated through 2025 and into 2026, making a diplomatic resolution on AI trade highly consequential for the US semiconductor industry.

The White House memo did not name specific Chinese companies or individuals, and it did not announce any immediate sanctions, penalties, or executive actions against the entities accused of the distillation campaigns.