Regulators are seeking trading and leverage records after the AI focused fund suffered a 67% drawdown and sold most of its public equities to Citadel.
The Securities and Exchange Commission has subpoenaed banks that handled trading and provided leverage to Situational Awareness following the AI focused hedge fund’s near collapse last month.
The subpoenas seek details on the timing of the fund’s trades and communications with lenders about its borrowing, according to people familiar with the matter. Banks were also instructed to preserve information related to the fund.
Any investigation remains at an early stage and does not mean enforcement action will follow. Situational Awareness has not been accused of wrongdoing.
“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 for the fund said, adding that it would cooperate with regulatory requests.
Situational Awareness, founded two years ago by former OpenAI researcher Leopold Aschenbrenner, managed more than $30 billion at its peak and borrowed tens of billions more to amplify its positions.
Its major counterparties included Bank of America, Citi, Goldman Sachs and JPMorgan Chase.
The fund generated large returns through concentrated bets on artificial intelligence companies, but heavy leverage magnified losses when AI stocks declined in July while technology companies it had bet against rose.
Situational Awareness ultimately lost about 67% of its portfolio value and was forced to unwind most of its public equities holdings.
It sold the bulk of those positions to Citadel, which has since shed more than 80% of the risk it acquired. Citadel executed nearly 100 block trades representing more than $4 billion in market value while unwinding the portfolio.
Situational Awareness retained some private investments, including a stake in Anthropic, as it continues operating following the drawdown.
The SEC declined to comment on the reported subpoenas, while Bank of America, Citi, Goldman Sachs and JPMorgan also declined to comment.
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