The Securities and Exchange Commission is investigating the near collapse of Situational Awareness, an AI-focused hedge fund led by former OpenAI researcher Leopold Aschenbrenner, according to Fortune and TechCrunch.
The fund, which managed more than $30 billion and traded with heavy borrowed money to amplify its bets, was forced to sell a large share of its positions at a discount after an AI stock selloff in late July wiped out billions of dollars in value, TechCrunch reported. Citadel, the firm run by Ken Griffin, bought the bulk of the liquidated public stock positions, according to Fortune.
The SEC has subpoenaed banks that financed and executed the fund's trades, asking them to preserve records related to the margin calls and forced sales, Fortune reported. The agency has not accused Situational Awareness of wrongdoing, and an SEC spokesperson declined to comment.
Situational Awareness said in a statement that "it is to be expected that regulators would closely examine any funds that are high profile, produce significant returns, or have particularly dramatic drawdowns," and that it would cooperate fully with any regulatory request.
The episode is a reminder that borrowed money riding on AI enthusiasm cuts both ways. The same volatility that produced outsized paper gains can force a fire sale within weeks, and now draws regulators too.