SEC subpoenas major banks in probe of AI hedge fund collapse
The U.S. Securities and Exchange Commission has issued subpoenas to several large banks seeking information about their involvement with the distressed AI-focused hedge fund Situational Awareness.
The Securities and Exchange Commission has subpoenaed Goldman Sachs, JPMorgan, Citigroup and Bank of America for details on their dealings with the AI-focused hedge fund Situational Awareness, according to a source familiar with the matter. Regulators are looking into the fund’s trades, leverage usage and communications with the banks.
Situational Awareness, led by former OpenAI researcher Leopold Aschenbrenner, saw its assets fall from roughly $45 billion to about $10 billion after a sharp tech sell-off in late July. The fund was forced to unwind a concentrated, highly levered portfolio that included positions in SK Hynix and CoreWeave, triggering margin calls from its prime brokers.
Citadel, the multi-strategy hedge fund run by Ken Griffin, purchased the distressed positions at an estimated 10% discount and later sold about 80% of the associated risk, according to a letter to investors. Both SK Hynix and CoreWeave have since recovered.
Goldman Sachs, JPMorgan and Citigroup declined to comment, and Bank of America was not reached for comment. The SEC’s request does not imply any alleged wrongdoing by the banks or the hedge fund, and such inquiries can conclude without enforcement action.
"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 fund said in a statement.
"We are a highly-regulated business and will cooperate to the fullest extent with any regulatory request."