{"slug": "ruth-sunderland-near-collapse-of-ai-hedge-fund-is-a-scary-trip-down-memory-lane", "title": "RUTH SUNDERLAND: Near-collapse of AI hedge fund is a scary trip down memory lane", "summary": "The near-collapse of AI hedge fund Situational Awareness, rescued by Ken Griffin's Citadel, echoes the 2007 collapse of two Bear Stearns hedge funds that foreshadowed the 2008 financial crisis, according to Ruth Sunderland in This is Money. The fund, founded by 24-year-old ex-AI researcher Leopold Aschenbrenner in 2024, made highly-leveraged bets on AI, and the U.S. Securities and Exchange Commission has subpoenaed Wall Street banks funding those bets. Sunderland warns that current geopolitical and economic instability, including U.S. President Donald Trump's tariff policies and rising government debt, could amplify the risks.", "body_md": "# RUTH SUNDERLAND: Near-collapse of AI hedge fund is a scary trip down memory lane\n\n**See more This is Money on Google -**[save us as a Preferred Source](https://google.com/preferences/source?q=thisismoney.co.uk)\n\nThe long, hot summer this year has brought a wave of nostalgia for 1976, when the nation tried to forget its economic woes and sang along to Elton John and Kiki Dee’s hit Don’t Go Breaking My Heart.\n\nIt is more recent, less rose-tinted memories of the summer of 2007 that are worrying me.\n\nIn particular, the debacle at hedge fund Situational Awareness seems an ominous reminder of the collapse of two Bear Stearns hedge funds in July that year, which turned out to be a harbinger of the Great Financial Crisis of 2008.\n\nThe two hedge funds borrowed heavily in order to bet on mortgage-backed derivatives. Their collapse led to the demise of the Bear Stearns parent bank, which was bought in a rescue deal by Jamie Dimon, boss of JPMorgan.\n\nThis time, legendary hedge fund manager Ken Griffin’s Citadel has ridden to the rescue of Situational Awareness, which was making highly-leveraged bets on AI, the current craze.\n\n24-year-old Leopold Aschenbrenner launched the hedge fund 2024\n\nWall Street regulator the Securities and Exchange Commission has just subpoenaed some of the Wall Street banks funding those bets. The parallels should not be stretched too far and certainly we have to hope this is not an augury of doom.\n\nBut why were Wall Street’s finest enabling epic gambles by a hedge fund founded by a 24-year-old ex-AI researcher?\n\nHere’s another ominous thought. In 2008, there was a high degree of international cooperation between central banks and governments, with the US playing a pivotal role. The current occupant of the White House seems incapable of constructive relationships and is a promoter of chaos, not calm.\n\nHe wantonly alienates even the friendliest of allies, Canada, with his tariff onslaughts. He has provoked Beijing with his latest threats of sanctions on Iran and its trading partners.\n\nInvestors are heading into assets such as bitcoin and gold in a so-called ‘debasement trade’, signifying loss of confidence in the dollar and a fear of [inflation](https://www.thisismoney.co.uk/money/bills/article-12412155/What-inflation-falling-means-you.html). Worries are bubbling up over rising US government debt, unsustainable fiscal policy and there are concerns the Federal Reserve’s independence is under threat.\n\nWhich is why there is such deep scepticism about US Treasury Secretary Scott Bessent’s efforts to keep [interest rates](https://www.thisismoney.co.uk/money/mortgageshome/article-11885727/When-rates-start-fall-Base-rate-forecasts.html) low by buying up long-term bonds. Can Bessent beat the bond markets? Very probably not. Back in 1992, the current US Treasury chief was working for George Soros, the man who broke the Bank of England on Black Wednesday, so he already knows that perfectly well.\n\nStars and yikes\n\n[Natwest’s move back into the US is a modest one,](/money/markets/article-16080611/Natwest-beefs-presence-US-market-change-ring-fencing-rules.html) so it is no doubt irksome to be suspected of plotting a Fred Goodwin-style folie de grandeur.\n\nObservers can hardly be blamed for it, though, considering the track record. RBS, the predecessor of today’s NatWest, bought a string of US banks through its New England offshoot Citizens in the 1990s and early 2000s.\n\nGoodwin, the chief executive who drove RBS to the brink of ruin, acquired Greenwich Capital, one of the big casualties of the US sub-prime meltdown, through RBS’s takeover of NatWest.\n\nIt was the deal for Netherlands bank ABN Amro that was the catalyst for RBS’s downfall. Yes, this was all quite a long time ago now. Paul Thwaite, the current chief executive, bears very little resemblance to Fred the Shred.\n\nBut with a horrible history like that, investors have a right to be wary.\n\nNEET crisis\n\nUnsurprising that a third of employers have cut back on entry-level jobs for those aged 16-24 in the past 12 months.\n\nLabour elder statesman Alan Milburn is due to publish his final report on young people not in education, employment or training (NEETs) next month. Unless he addresses the ballooning costs and risks to employers of hiring a young person, it is unlikely to have much effect.\n\nThe cost of employing a 21-year-old is up 27 per cent in three years and 86 per cent in a decade, according to calculations by entrepreneur and NEETs campaigner Christopher Nieper.\n\nNew worker rights mean taking on a youngster is an expensive gamble many employers feel it is hard to afford.\n\nChancellor John Healey should cut employers’ National Insurance contributions in the [Budget](https://www.thisismoney.co.uk/money/tax/article-15328389/Budget-2025-glance-key-points-Rachel-Reeves-speech.html), as the CBI and others have said. He should also introduce a skills tax incentive to encourage firms to hire apprentices.\n\nAs for the NEETs themselves, they face despair by a thousand bots as their applications are thrown out by AI.\n\n## DIY INVESTING PLATFORMS\n\nAffiliate links: If you take out a product This is Money may earn a commission. 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This does not affect our editorial independence.\n\n[Compare the best investing account for you](https://www.thisismoney.co.uk/money/diyinvesting/article-1718291/Pick-best-cheapest-investment-Isa-platform.html?ico=tim-affiliate_desktop_bottom-link-click)", "url": "https://wpnews.pro/news/ruth-sunderland-near-collapse-of-ai-hedge-fund-is-a-scary-trip-down-memory-lane", "canonical_source": "https://www.dailymail.com/money/markets/article-16080673/RUTH-SUNDERLAND-Near-collapse-AI-hedge-fund-scary-trip-memory-lane.html?ns_mchannel=rss&ns_campaign=1490&ito=1490", "published_at": "2026-08-26 07:15:23+00:00", "updated_at": "2026-08-26 07:42:49.380070+00:00", "lang": "en", "topics": ["artificial-intelligence", "ai-policy", "ai-ethics"], "entities": ["Situational Awareness", "Citadel", "Ken Griffin", "Leopold Aschenbrenner", "Securities and Exchange Commission", "Bear Stearns", "JPMorgan", "Ruth Sunderland"], "alternates": {"html": "https://wpnews.pro/news/ruth-sunderland-near-collapse-of-ai-hedge-fund-is-a-scary-trip-down-memory-lane", "markdown": "https://wpnews.pro/news/ruth-sunderland-near-collapse-of-ai-hedge-fund-is-a-scary-trip-down-memory-lane.md", "text": "https://wpnews.pro/news/ruth-sunderland-near-collapse-of-ai-hedge-fund-is-a-scary-trip-down-memory-lane.txt", "jsonld": "https://wpnews.pro/news/ruth-sunderland-near-collapse-of-ai-hedge-fund-is-a-scary-trip-down-memory-lane.jsonld"}}