SEC Subpoenas Major Wall Street Banks in Probe of $30 Billion AI Fund's Near-Collapse

The Securities and Exchange Commission has issued subpoenas to several leading Wall Street banks seeking information on their dealings with Situational Awareness, an artificial intelligence hedge fund that came close to collapsing last month, according to three people familiar with the requests cited by The New York Times. Regulators are requesting trade-timing data and communications related to lending, including messages exchanged with the San Francisco-based firm about borrowed funds. The SEC has not accused the fund of wrongdoing. The subpoenas were sent to banks that cleared Situational Awareness' trades and financed its positions. Bank of America, Citi, Goldman Sachs and JPMorgan Chase were among the fund's largest counterparties, according to a regulatory filing. Investigators also instructed the banks to preserve all records connected to the firm. The four banks declined to comment, as did the SEC. A spokesperson for Situational Awareness said the level of scrutiny was unsurprising for a high-profile fund that delivered strong returns or suffered sharp drawdowns. The inquiry comes as bank executives raise concerns about hard-to-see leverage in markets. JPMorgan CEO Jamie Dimon warned this month that margin debt has reached record levels. At its peak, Situational Awareness managed more than $30 billion and borrowed tens of billions more. The fund was founded roughly two years ago by Leopold Aschenbrenner, a 24-year-old former OpenAI researcher. Filings indicate the strategy became significantly more aggressive ahead of the break: protective put options valued at $8.5 billion in March had largely vanished by June 30, replaced by $12.5 billion in outright long positions. In late July, AI-linked stocks declined while the traditional technology names the fund had shorted rose. Margin calls followed, the portfolio dropped about 67%, and Citadel purchased the public book at roughly a 10% discount. Some of the forced unwind spilled into crypto-related equities. Mining stocks had grown to about a quarter of the portfolio, reaching $1.99 billion in the final 13F filing. Core Scientific, Riot Platforms and IREN were among the largest positions. Citadel has since worked through the miner overhang via nearly 100 block trades. An SEC investigation at this stage may not lead to an enforcement case, but the material gathered could illuminate how long banks continued financing a concentrated AI trade before tightening credit. Situational Awareness still holds a stake in Anthropic, which is considering a public listing; that position now appears to be the most visible marker of what remained after July.