Feds Investigating Wall Street Bro After His AI Hedge Fund Imploded Spectacularly

The U.S. Securities and Exchange Commission is investigating the collapse of AI hedge fund Situational Awareness, sending subpoenas to banks that handled its trades after the fund lost over two-thirds of its value in July. The fund, founded by 24-year-old Leopold Ashenbrenner, a former OpenAI researcher, managed $45 billion at its peak but nearly imploded during a tech sell-off, selling most of its assets to Citadel. No wrongdoing has been alleged, and the fund said it will cooperate fully with regulators.

The spectacular saga around Situational Awareness isn’t over yet. The once mega-hyped AI hedge fund, founded by 24-year-old Leopold Ashenbrenner, nearly imploded last month https://futurism.com/artificial-intelligence/situational-awareness-ai-investor-crumbling after it lost over two-thirds of its value https://www.reuters.com/business/finance/situational-awareness-portfolio-sinks-67-july-ai-stock-rout-letter-shows-2026-07-31/ during a mass tech sell-off, wiping out billions of dollars of investor money. Now, the Securities and Exchange Commission is investigating its catastrophic reversal of fortunes, sending subpoenas to the banks that handled and fronted the money for its disastrous bets, the New York Times reports https://www.nytimes.com/2026/08/24/business/sec-situational-awareness-investigation.html , citing anonymous sources. The subpoenas demanded details on the timing of the fund’s trades and for its communications with the bank about the money it was borrowing. Situational Awareness used the borrowed money, called leverage, to buy shares in the AI stocks it was investing in, which boosted its returns but exposed it to even greater losses when those assets hit a downturn. As it stands, Situational Awareness hasn’t been accused of any wrongdoing, and it’s possible that the investigation won’t lead to any action or punishments such as fines being taken against it. In a statement, the fund framed the SEC’s subpoenas as a matter of course. “It is to be expected that regulators would closely examine any funds that are high profile, produce significant returns or have particularly dramatic drawdowns,” a spokesperson told the NYT . “We are a highly regulated business and will cooperate to the fullest extent with any regulatory request.” Situational Awareness’s near implosion became a symbol of heedless AI optimism — and a warning sign of the industry’s precarious foundations. https://futurism.com/artificial-intelligence/ai-investors-suddenly-quaking-boots Its founder Aschenbrenner was a former OpenAI researcher who had no investment experience before launching the fund, but generated cultish hype by essentially telling AI investors what they wanted to hear: that the tech would bring endless gains. At its peak, it managed assets worth $45 billion in total. But its all-in bets on exclusively AI stocks — and hedges against industries that some thought would be outmoded by AI such as software — caused it to tank when the market hit a downturn. The Financial Times found https://www.ft.com/content/280336bf-dbed-405f-b38e-5af644a21549?syn-25a6b1a6=1 that the fund operated with a skeleton staff of only four investment professionals and eight employees overall. The fund was only spared a total implosion by selling the majority of its assets to the investment firm Citadel — marking “one of the largest and most sudden stock transactions in Wall Street history, according to the FT . More on AI: Tech CEO’s Ridiculous Excuse Falls Apart in Court, Sentenced to Prison