Key Takeaways:
Anthropic has accused Alibaba of orchestrating the largest known AI model distillation attack, using nearly 25,000 fraudulent accounts to extract capabilities from its Claude models through 28.8 million exchanges over six weeks.
Anthropic sent a letter to the U.S. Senate Committee on Banking, Housing, and Urban Affairs on June 10 alleging that operators affiliated with Alibaba and its Qwen AI lab carried out the campaign between April 22 and June 5, according to a copy of the letter obtained by CNBC. The company described the effort as "the largest known distillation attack on Anthropic to date."
"We believe combating the threat of illicit distillation requires coordinated action between government and industry," an Anthropic spokesperson said in a statement.
Distillation is a training method in which a smaller model is built using outputs from a stronger, existing model. In this case, the attackers targeted Claude's software engineering and agentic reasoning capabilities — the features Anthropic considers most commercially valuable. The 28.8 million exchanges exceeded the combined volume of three earlier campaigns Anthropic disclosed in February, which involved DeepSeek, Moonshot AI and MiniMax and generated roughly 16 million exchanges through about 24,000 accounts.
The accusation lands two months after the White House Office of Science and Technology Policy issued a memorandum pledging to help AI companies detect and coordinate against industrial-scale distillation. Anthropic wrote that Alibaba "ignored the Trump Administration's warnings" by proceeding with the attacks after the memo was published.
The Regulatory Crossfire
The timing is sensitive for Anthropic, which filed confidentially for an IPO this month at a $965 billion valuation after raising $65 billion in a Series H round. US officials have estimated that unauthorized distillation costs Silicon Valley labs billions of dollars, and the threat of cheaper imitation products from China that siphon away customers is a material risk for a company heading to public markets.
Alibaba's American depositary receipts fell more than 3 percent on the news, dropping below $100 in afternoon trading Wednesday. The Pentagon added Alibaba to its Chinese military companies blacklist on June 8, a designation Anthropic cited in its letter. Alibaba sued the Defense Department this week to win removal from that list, calling the label baseless.
Lawmakers are moving in parallel. Senators Bill Hagerty and Andy Kim plan to introduce an amendment to must-pass defense legislation that would blacklist or sanction any Chinese firm found to be improperly accessing US AI model output. A related bipartisan bill in the House, backed by Representatives Bill Huizenga and Sydney Kamlager-Dove, is also being considered.
Anthropic's Own Washington Problem
Anthropic's calls for government support come as the company is embroiled in a separate dispute with the Trump administration. Commerce Secretary Howard Lutnick signed an order less than two weeks ago blocking foreign nationals from accessing Anthropic's latest Claude models, Fable 5 and Mythos 5, citing national security concerns. Anthropic disabled the models to comply and sent senior staffers to Washington for meetings that have produced little progress toward restoring service.
The result is a company caught between two fronts. Anthropic needs the government to crack down on Chinese labs extracting its technology while simultaneously fighting the same government's decision to restrict its own products. In its letter, Anthropic argued that protecting US models from distillation and allowing those models to be deployed commercially are complementary rather than contradictory goals.
If the legislative proposals gain traction, the consequences could extend beyond Anthropic's models to the broader question of how the US enforces an intellectual property border around AI systems that exist as software and can be copied through nothing more than a well-crafted prompt. Anthropic shares, which trade on expectations of a public listing later this year, face uncertainty on both fronts — the competitive threat from Chinese distillation and the regulatory constraints imposed by Washington.
This article is for informational purposes only and does not constitute investment advice.
