The Securities and Exchange Commission subpoenas major Wall Street lenders to investigate the near-collapse of Leopold Aschenbrenner's Situational Awareness hedge fund.

The Securities and Exchange Commission has subpoenaed several major Wall Street lenders, including Goldman Sachs, JP Morgan, Citigroup, and Bank of America, to investigate the role of investment banks in the near-collapse of Leopold Aschenbrenner's Situational Awareness hedge fund. The fund experienced a dramatic drawdown from $45 billion to $10 billion in late July following a tech sell-off that triggered multiple margin calls. Situational Awareness utilized high levels of leverage, reaching up to 400%, which forced the fund to unwind its concentrated positions in companies like SK Hynix and CoreWeave. Ken Griffin's Citadel hedge fund eventually stepped in to purchase these positions at a discount. While the SEC inquiry does not imply any wrongdoing by the banks or the fund, regulators are seeking clarity on how leverage is underpinning the AI boom. Situational Awareness stated that as a highly-regulated business, they will cooperate fully with the regulatory request.

Sources

• WSJ
  The Connections That Turned a Precocious Teen Into the Fallen ‘Nostradamus of AI’
• The New York Times
  S.E.C. Investigating Near-Implosion of A.I. Hedge Fund
• CNBC
  SEC reportedly subpoenas Wall Street banks over AI hedge fund Situational Awareness's near collapse
• Seeking Alpha
  Regulator sends subpoenas to banks for details on Situational Awareness trades - report (BAC:NYSE)
• Reuters
  US SEC subpoenas Wall Street lenders over Situational Awareness meltdown, source says