SEC Probes Situational Awareness After 67% AI-Fund Rout
Former OpenAI researcher Leopold Aschenbrenner founded Situational Awareness in 2024, building a highly leveraged portfolio around AI chips, memory and computing infrastructure. The fund’s net return reached 439% through June 2026 and 1,551% since inception, drawing about $20 billion in assets. Its reversal has become a warning for investors about concentrated exposure, borrowed money and crowded trades across the AI supply chain.
Situational Awareness’s portfolio plunged 67% in July 2026, forcing the fund to sell most of its public-equity holdings to Ken Griffin’s Citadel and eliminate leverage, though it remained up 80% for the year. On August 24, the U.S. Securities and Exchange Commission was reported to be examining trade timing and lender communications, with subpoenas sent to Bank of America, Citigroup, Goldman Sachs and JPMorgan Chase. The inquiry is at an early stage, and no wrongdoing has been alleged.
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The history behind this eventSEC Subpoenas Four Banks Over Leveraged AI Fund Collapse
Situational Awareness, a hedge fund built around artificial-intelligence trades, used financing from major prime brokers to run leverage of as much as 400%. Its strategy paired long positions in AI chipmakers with shorts in software stocks, leaving it exposed when both sides moved against the fund. The resulting losses and liquidity squeeze have raised questions about how banks monitored concentrated positions, extended credit and managed margin risk.
The US Securities and Exchange Commission has opened an investigation and subpoenaed Goldman Sachs, JPMorgan Chase, Citigroup and Bank of America. The agency is seeking communications about the fund’s use of leverage, a timeline of margin calls and records explaining liquidation decisions. Regulators are examining how the fund obtained financing equal to 400% of its capital before it was forced to sell its publicly traded equity portfolio at discounted prices.
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