SEC Probes Discount Fire-Sale of AI Hedge Fund Situational Awareness After Near Collapse

Huo Xing Cai Jing reported that The New York Times said on Aug. 25 that the U.S. Securities and Exchange Commission is investigating the recent near collapse of AI-focused hedge fund Situational Awareness. The agency has issued subpoenas to major Wall Street banks involved in the fund's trading and in providing leveraged financing. People familiar with the matter said the SEC is seeking details on the timing of the fund's trades, as well as all communications related to borrowed funds, and has instructed the banks to preserve all materials tied to the fund. Situational Awareness was founded by Leopold Aschenbrenner, a former OpenAI researcher, and previously posted strong gains amid the AI boom. At its peak, the fund oversaw more than $30 billion in assets and borrowed hundreds of billions of dollars to magnify positions. By the end of last month, losses accelerated as shares of widely held AI companies fell while traditional tech stocks the fund had shorted rose. The drawdown forced a fire-sale liquidation, with the fund selling most of its portfolio at a discount to Citadel. The SEC said the inquiry remains at an early stage and does not imply wrongdoing. Situational Awareness has not been accused of violations and said it will "fully cooperate with any regulatory requirements."