SEC Subpoenas Wall Street Banks Over AI Hedge Fund's Near-Collapse

The U.S. Securities and Exchange Commission has issued subpoenas to Goldman Sachs, JPMorgan Chase, Citigroup, and Bank of America seeking information about their role in the near-collapse of AI-focused hedge fund Situational Awareness. The subpoenas, first reported by The New York Times and confirmed by Reuters, request details on the timing of the fund’s trades, its use of leverage, and communications with the lenders. The inquiry is in its early stages and does not imply wrongdoing. Situational Awareness, led by former OpenAI researcher Leopold Aschenbrenner, plummeted from approximately $45 billion to around $10 billion in late July after a technology sector sell-off forced it to unwind heavily leveraged positions. The fund held concentrated stakes in SK Hynix and CoreWeave. Losses triggered margin calls, prompting a fire sale of the public equity portfolio to Ken Griffin’s Citadel at a roughly 10% discount. Citadel has since offloaded about 80% of the risk through more than 100 block trades worth over $4 billion. The fund operated with reported leverage of up to 400%. The SEC and the four banks declined to comment. Situational Awareness said it would cooperate fully with regulators.