Treasury Secretary Bessent: U.S. Is Finding 'Watermarks of Our LLMs' on Chinese Models and Can Sanction for It

CNBC (corroborated by IBTimes, Semafor)·high signal

Bessent told Fox Business on July 21 that the administration will investigate whether Chinese AI models were distilled from U.S. models, saying 'we are finding watermarks of our U.S. large language models on many of the Chinese models, and that's unacceptable' and that sanctions are available as a remedy for the theft. This escalates from Anthropic's June 10 letter to Senate Banking (Scott/Warren) alleging Alibaba's Qwen lab ran 28.8M Claude exchanges through ~25,000 fraudulent accounts between April 22 and June 5. Bessent is set to represent the U.S. at AI talks with China in September — meaning open-weight Chinese models many builders run locally now carry live sanctions risk.