The SEC has reportedly subpoenaed several Wall Street banks for information tied to AI-focused hedge fund Situational Awareness's near-collapse last month. Regulators want details on the fund's trades, leverage and lender communications after a tech sell-off forced it to unwind concentrated, leveraged equity positions.
The Securities and Exchange Commission has reportedly subpoenaed several major Wall Street lenders over their role in the near-collapse of AI-focused hedge fund Situational Awareness. Regulators are seeking insight into the fund's trades, use of leverage and communications with the banks, which include Goldman Sachs, JP Morgan, Citigroup and Bank of America, according to Reuters.
Fund plunged from $45 billion to $10 billion
Situational Awareness plunged from about $45 billion to around $10 billion in late July after last month's tech sell-off hammered its holdings. The fund, led by former OpenAI researcher Leopold Aschenbrenner, was driven by reported leverage of up to 400%.
It was forced to unwind much of its publicly listed portfolio of large, concentrated, levered positions — including SK Hynix and CoreWeave — after losses triggered several margin calls among its prime brokers. Citadel, Ken Griffin's multi-strategy hedge fund, then stepped in to buy the positions at a discount understood to be around 10%.
Citadel has offloaded most of the risk
Griffin said in an investor letter Friday that Citadel has since offloaded about 80% of the risk tied to the Situational Awareness portfolio. SK Hynix and CoreWeave have since rallied.
Goldman Sachs and JP Morgan declined to comment. The information request does not mean the banks or Situational Awareness have been accused of wrongdoing — such inquiries can conclude without any enforcement action, though the episode has cast light on how leverage underpins the wider AI boom.
Source: CNBC
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