While many things might be legal (or hasn't been ruled clearly illegal yet) /under different jurisdictions, we are still in the process of figuring out what we accept as ethical. As the output of models can't be easily copyrighted, destillation is equally disputed. Particularly if the primary model interaction was not destillation (as in this case) IMHO it will be legally quite difficult to restrict secondary use for training. In the end we have to find a legislation and probably even international treaties that account for the fact that classical copyright is beginning to become an obsolete concept.