OpenAI officially accuses a Chinese AI lab of distillation for the first time, says the lab tried to extract its models' hidden reasoning.

The operators (China linked developers) couldn't crack any encryption; instead they copied encrypted reasoning from one conversation and asked a model elsewhere to decrypt and transcribe it.

"The activity began on July 1, initially at a low volume until we observed high-volume spikes on July 24 and 25 consisting of 16,000 requests1 using a relevant extraction pattern from over 4,000 users. Further investigation identified related prompt-pattern activity across a cluster of more than 15,000 users, which we fully disrupted by July 28."

In response, OpenAI closed the replay pathway, added checks that hold streamed output which might expose reasoning, banned accounts and worked with third-party services the operators used.