US Official David Sacks Accuses DeepSeek of Intellectual Property Theft

A US official has labeled China’s DeepSeek AI a possible instance of intellectual property theft.

David Sacks, the White House’s head of artificial intelligence and cybersecurity, claimed that there’s “substantial evidence” DeepSeek AI distilled knowledge from OpenAI’s models, a practice he considered intellectual property crime. By using the results of a more sophisticated AI model to train a smaller one, distillation enables the smaller model to mimic comparable skills of the larger model using fewer resources.

Sack’s allegation contrasts US President Donald Trump’s view that the platform is a “wake up call.”

DeepSeek Violate OpenAI’s Terms, Sacks Says

Although he did not provide evidence, Sacks indicated in an interview with Fox News on Tuesday that DeepSeek AI trained its models using responses from OpenAI’s models.

OpenAI also made similar claims against DeepSeek’s techniques, telling the Financial Times that it found “distillation” in the Chinese firm’s R1 development.

Read more: Scott Bessent Confirmed as US Treasury Secretary, Set to Steer Financial Policy

Even though distillation is a popular method in AI development, OpenAI’s guidelines specifically ban using its outputs to train rival models. According to a source familiar with the company’s position, the matter concerns knowledge transfer and whether DeepSeek used model outputs to create a direct competitor.

Another source claimed that OpenAI and its partner Microsoft took action last autumn, probing accounts allegedly related to DeepSeek, which were accessing OpenAI’s API. OpenAI terminated access to these accounts after discovering evidence of distillation that violated its terms of service.

With its quick rise in the App Store charts, DeepSeek surpassed US rivals like OpenAI’s ChatGPT, Google’s Gemini, and Anthropic’s Claude. Its equal performance level with OpenAI’s O1-mini while using a portion of the resources made it even more revolutionary.

Crypto Market’s Response

This development caused a sharp downturn in tech stocks and the crypto market, with AI-focused cryptocurrencies experiencing the most significant price declines. Bitcoin temporarily fell below $100,000, and on January 27, total liquidations increased by over 850%, removing nearly $1 billion in leveraged positions.

Since DeepSeek can reduce the cost of operating AI-driven blockchain applications, many advocates of the cryptocurrency sector believe its success might be bullish, particularly for AI projects.