Fund dropped from $45 billion to $10 billion in late-July tech sell-off
The Securities and Exchange Commission has issued subpoenas to banks that provided leveraged-trading loans to the AI-focused hedge fund Situational Awareness, according to a report.
The probe follows a sharp decline last month, when the fund’s value fell from about $45 billion to $10 billion during a tech sell-off in late July. The SEC routinely investigates funds that experience large losses, and Situational Awareness has not been accused of any wrongdoing.
According to the report, the subpoenas sought details on the timing of trades and communications with lenders. The SEC also told the banks to preserve any information about Situational Awareness.
The fund, at its highest mark, managed more than $30 billion and borrowed billions more, according to a regulatory filing. Its lenders included Bank of America, Citi, Goldman Sachs and JPMorgan Chase.
A Situational Awareness spokesperson said the firm would cooperate with regulators. “It is to be expected that regulators would closely examine any funds that are high profile, produce significant returns or have particularly dramatic drawdowns,” the spokesperson said in a statement. “We are a highly regulated business and will cooperate to the fullest extent with any regulatory request.”
The fund was founded by Leopold Aschenbrenner, a German Columbia University alumnus who previously worked as a researcher at OpenAI. He started Situational Awareness at age 22 and named it after an essay he wrote about the future of AI.
In July, Aschenbrenner was forced to sell much of the fund’s portfolio to Citadel at a large discount. Citadel founder Ken Griffin told investors in a letter Friday that the firm has since sold about 80 percent of the risk from the Situational Awareness portfolio. According to a report, two of the positions Situational Awareness sold — SK Hynix and CoreWeave — have since rallied.