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Microsoft and OpenAI Investigated Whether DeepSeek Illicitly Obtained OpenAI API Data

Microsoft and OpenAI investigated whether DeepSeek-linked users collected OpenAI API outputs for possible model distillation. The public evidence does not establish a ChatGPT breach, private-conversation theft, or proven illegal conduct.
From TheFinanceBase Team6 min to read
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Short answer: Microsoft and OpenAI investigated whether people believed to be linked to DeepSeek collected large amounts of output through OpenAI’s API and may have used it for model distillation. The public record supports an investigation and serious allegations—not a proven finding that DeepSeek hacked ChatGPT, accessed private user conversations, stole OpenAI’s model weights, or was found liable for illegal conduct.

What happened?

On January 29, 2025, Bloomberg reported that Microsoft security researchers had observed suspicious activity involving OpenAI API accounts during fall 2024. People familiar with the matter reportedly believed the activity might be connected to DeepSeek. Microsoft notified OpenAI, and the companies investigated whether the accounts had been used to obtain OpenAI-generated output at scale or to evade OpenAI’s access controls.

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The timing mattered. DeepSeek’s rapid rise drew intense attention after January 27, 2025, as investors and technology companies assessed how a relatively low-cost Chinese model appeared to compete with leading U.S. systems.

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OpenAI separately said it had seen indications that China-based groups were using distillation to reproduce the capabilities of advanced U.S. models. It said it was reviewing whether DeepSeek had “inappropriately distilled” its models. That was OpenAI’s allegation and assessment, not a publicly released independent forensic finding.

In May 2025, congressional testimony described anomalous extraction from OpenAI developer accounts believed to be affiliated with DeepSeek and said OpenAI had blocked those accounts. In a February 2026 submission to a House committee, OpenAI said it continued to observe activity it associated with DeepSeek employees, including efforts it characterized as adversarial distillation and attempts to evade controls. That later account remains a first-party claim by OpenAI.

This was not established as a breach of ChatGPT conversations

The most important distinction is between OpenAI API output and private conversations held in ordinary ChatGPT accounts.

The original reporting described developers using OpenAI’s API to integrate models into software. An API account can send prompts programmatically and receive model-generated answers. If many accounts or automated processes are used, that activity can generate a large corpus of answers without accessing OpenAI’s internal systems or randomly browsing users’ ChatGPT histories.

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The publicly described evidence did not establish that DeepSeek accessed private ChatGPT conversations, hacked OpenAI’s databases, obtained individual users’ histories, or copied OpenAI’s model-weight files. “ChatGPT data” is therefore an imprecise shorthand if it suggests that consumer conversations were breached. The more accurate description is that OpenAI-generated output may have been collected through API access.

What is model distillation?

Distillation is a standard machine-learning technique, not inherently an illegal act.

  1. A large “teacher” model answers many carefully selected prompts.
  2. A smaller “student” model is trained on those prompts and answers.
  3. The student learns useful patterns, such as instruction following, problem-solving behavior, formatting, and sometimes reasoning traces, without receiving the teacher’s private weights.

Distillation can make a model cheaper to train, faster to run, or easier to deploy. Major AI laboratories use synthetic data and related techniques. Congressional testimony has also described distillation as a widely used industry practice, including among U.S. companies.

The disputed issue is not whether distillation exists. It is whether OpenAI output was gathered at high volume through concealed or unauthorized accounts, potentially in violation of contractual restrictions, and then used to develop a competing model.

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What Microsoft reportedly observed—and what remains unknown

According to Bloomberg’s reporting, Microsoft researchers observed people they believed might be linked to DeepSeek exfiltrating a large quantity of data through the OpenAI API. The public reporting did not disclose the affected account names, a precise volume of output, the raw logs, the prompts and answers, or a complete technical method for attributing the activity to DeepSeek.

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That limitation matters. Suspicious activity and corporate attribution are separate questions. Investigators would need to connect the accounts to DeepSeek through evidence such as payment records, account ownership, infrastructure, code, employees, or company direction. Activity by people associated with a company does not automatically establish that the company authorized or benefited from it.

The public record reviewed for this article also does not establish that the collected material was used primarily or exclusively to train DeepSeek’s R1 model. It explains why investigators considered distillation a possibility, not what dataset ultimately trained the model.

What OpenAI’s terms prohibited

OpenAI’s business and services terms have restricted several activities relevant to the allegation, including:

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  • using model output to develop competing AI models, subject to limited exceptions;
  • model extraction or reverse engineering;
  • extracting data except through permitted methods;
  • circumventing rate limits or protective measures; and
  • buying, selling, or transferring API keys.

The August 2023 Business Terms expressly addressed model-extraction attacks and using output to develop competing models. OpenAI’s December 20, 2024 Early Access Terms also included restrictions on distillation and training a model with output. The current Services Agreement retains substantially similar concepts, but today’s wording should not automatically be treated as the exact contract that governed every event in late 2024.

A possible terms-of-service violation is not automatically copyright infringement, trade-secret misappropriation, computer fraud, or criminal theft. Each of those legal theories requires different facts and legal tests.

What is established, alleged, and unresolved?

Established from public reporting Alleged or assessed by OpenAI and related reporting Still unresolved publicly
Microsoft and OpenAI investigated the matter. Suspicious API activity was connected to people believed to be linked to DeepSeek. Whether DeepSeek itself directed or authorized the activity.
The reported activity involved OpenAI’s API. Large-scale output collection may have supported distillation. The precise volume, prompts, and contents of the output.
OpenAI had contractual restrictions on competing-model development and circumvention. Accounts may have attempted to evade usage controls. Whether the output was used in DeepSeek training and to what extent.
OpenAI reportedly blocked accounts believed to be involved. OpenAI later continued to characterize related conduct as adversarial distillation. Whether any law was broken or any court would find liability.

Why API output could be valuable

Model-generated answers can provide synthetic training examples, including instruction-following demonstrations, domain-specific responses, problem-solving attempts, and examples of what a high-performing answer looks like. Automated querying can produce many such examples more cheaply than building an equivalent frontier model from scratch.

That economic value explains why AI providers monitor unusual request patterns and restrict automated extraction. But it does not prove that DeepSeek used a particular OpenAI-derived dataset. Similar behavior between models can also result from common public training material, similar prompts, ordinary model convergence, or independent engineering.

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The legal questions are separate

Contract

If a customer used OpenAI output to train a competing model in a prohibited way, OpenAI could potentially pursue account termination, contractual remedies, or other relief, depending on the agreement and evidence.

Trade secrets

Model output is not automatically a trade secret. A trade-secret claim would require proof that the information met the applicable legal definition and was acquired, used, or disclosed improperly.

Copyright

Copyright is also more complicated than saying OpenAI owned every answer. OpenAI’s Help Center guidance says it does not claim copyright over API-generated content for customers, while the Services Agreement addresses customer ownership of output to the extent permitted by law. Those provisions do not by themselves resolve whether a large-scale extraction campaign breached a contract or violated another law.

Unauthorized access

The facts would look different if investigators proved stolen credentials, unauthorized access, or deliberate circumvention of technical barriers. Receiving output through a valid API account is not the same factual scenario as hacking into OpenAI’s systems, even if the account was misused.

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What later statements add

OpenAI’s February 2026 House submission says it continued observing attempts associated with DeepSeek employees and described techniques involving circumvention, third-party routers, and adversarial distillation. This is relevant as an update to OpenAI’s position, but it is not a court judgment or a publicly released independent forensic report.

The strongest evidence that could resolve the dispute would include the affected API accounts, request volumes and timing, prompt-and-output samples, account and payment links, technical indicators connecting the activity to DeepSeek, the exact terms governing the accounts, and evidence showing whether the output entered DeepSeek’s training process.

Bottom line

Microsoft and OpenAI investigated whether people linked to DeepSeek used OpenAI’s API to collect model outputs at scale for possible distillation. That is materially different from proving that DeepSeek hacked ChatGPT, stole private user conversations, copied OpenAI’s weights, or committed criminal theft. As of the public record described here, the case remains an allegation and an ongoing attribution question—not a conclusively proven finding.

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