Author: Gu Yu, ChainCatcher
A prodigy born in 2001, admitted to Columbia University at age 15, and graduated at 19 as valedictorian of his class with three degrees in mathematics, statistics, and economics. Leopold Aschenbrenner was a core member of OpenAI’s Superalignment team until he was fired over a safety memo; he subsequently founded a hedge fund and grew its assets under management to over $20 billion within two years.
In July 2026, the 24-year-old once hailed by Silicon Valley and Wall Street as the "prophet of AI" brought a阶段性 chapter of his legend to a close after suffering a 67% monthly loss and being forced to liquidate approximately $16 billion in public market positions.
I. Letter to Investors: "We Let You Down This Month"
On the last day of July, Aschenbrenner sent a brief but somber letter to his fund's LP investors.
“We let you down this month,” he wrote in the letter.
Behind this letter lies a massive loss of approximately 67% for the Situational Awareness Fund in July alone. According to the investor letter, even after accounting for this month’s loss, the fund’s year-to-date return remains around 80%—but at the end of May, that figure was still approximately 270%. Between these two months, the contrast between triumph and collapse was defined solely by a sharp decline in the AI sector.
Losses forced Aschenbrenner to make a difficult decision: selling the vast majority of its public market positions to Citadel, led by Ken Griffin, to raise funds to meet margin calls from lenders. According to reports, Citadel acquired Situational’s entire $16 billion public market portfolio at a discount within less than 36 hours.
Meanwhile, Situational had reached an agreement late Wednesday night to sell its stake in AI giant Anthropic to an investor consortium led by Greenoaks and Sequoia Capital for $3.5 billion—but the fund ultimately withdrew from the deal on Thursday morning.
Aschenbrenner offered his own interpretation in the letter, attributing some blame to short sellers targeting the fund’s holdings, stating they exacerbated losses, and likening Situational’s experience to a “bank run.” He also informed investors that the fund had eliminated all leverage from its portfolio.
He explicitly stated, “I take full responsibility for these events.” The fund has not been closed, liquidated, or converted into a purely private fund; it will continue to operate as a hybrid fund, but public positions will temporarily be fully managed. He pledged to strengthen portfolio management, the risk team, and vigilance, turning the “costly scars” into valuable lessons, and expressed optimism about current opportunities—fundamentals are accelerating toward improvement, and prices have declined significantly.
II. The Full Story of the Liquidation: AI Stock Plunge Combined with Leverage Backlash
The collapse of Situational was not without warning.
Unlike most diversified hedge funds, Aschenbrenner has bet almost everything on the AI revolution since founding the fund. He has publicly stated multiple times that AI will be the world’s largest investment opportunity over the coming years, leading the fund to maintain long-term heavy positions across the AI value chain—including AI computing power, data centers, and power infrastructure—while simultaneously shorting certain traditional software companies he believes will be negatively impacted by AI. The strategy aims to generate excess returns by going long on AI and short on traditional software.
During the prolonged rise in AI-themed markets, this strategy delivered outstanding performance. By the end of May, Situational’s year-to-date return peaked at approximately 270%, and its assets under management rapidly grew to over $20 billion, making it one of Wall Street’s most closely watched star funds this year.
The problem is that the fund was built on a highly leveraged foundation. When the AI sector experienced a sharp correction in July, multiple heavily weighted stocks fell simultaneously, while certain previously established short positions in software stocks rose against the trend, putting pressure on both the long and short sides. As the fund’s net asset value rapidly shrank, lenders began issuing margin calls, forcing Situational to sell off part of its assets to meet margin requirements. These sales further depressed stock prices, creating a vicious cycle: falling prices → margin calls → forced selling → further price declines.
More critically, many of the stocks held by Situational themselves had limited liquidity. Once the market became aware of the fund’s deleveraging pressures, some institutions began establishing short positions in its heavily weighted holdings, further amplifying market volatility. Aschenbrenner later compared the event to a "bank run" in his letter to investors, arguing that liquidity evaporates rapidly when all counterparties attempt to exit simultaneously.
Ultimately, the fund did not survive long enough to see the market stabilize. The very next day after Situational completed its large-scale deleveraging (July 31), the AI sector surged sharply, with SanDisk rising 25.99% in a single day and CoreWeave up 21.51%. This moment became the most dramatic part of the entire event: Aschenbrenner did not misjudge the long-term value of AI—he was simply eliminated by short-term market volatility under high leverage.
III. The Past and Present of the Crypto World
Few know that this "AI oracle" was once a member of the crypto world.
In early 2022, Aschenbrenner joined the Future Fund team at FTX, founded by Sam Bankman-Fried. At the time, FTX was the world’s second-largest cryptocurrency exchange, with a valuation exceeding $32 billion. The 19-year-old Aschenbrenner was involved in the “effective altruism” (EA) movement, evaluating grant opportunities with the goal of directing hundreds of millions of dollars toward initiatives with the greatest potential to improve human well-being.
However, in November 2022, FTX faced a series of collapses due to the misappropriation of customer funds and debt issues, leading to its bankruptcy filing. The founder, SBF, was ultimately sentenced to 25 years in prison, and his proclaimed ethic of “making money to give back” he himself described as “mostly a front.”
Aschenbrenner left the institution just before the FTX collapse. His experience at the heart of the world’s largest financial scam gave him an early awareness of the complexity and risks in the market.
But the irony of fate is this: after leaving FTX, Aschenbrenner joined OpenAI’s Superalignment team to research AI safety—work originally intended to “apply the brakes” to superintelligence. In April 2024, he was fired under the pretext of “leaking information” for writing a security memo warning of OpenAI’s inadequate safeguards. A month later, the Superalignment team was also disbanded.
Just two months after being fired, Aschenbrenner published a 165-page article titled "Situational Awareness: The Next Decade." He then pivoted to launch the most aggressive AI acceleration fund in the market, betting everything on the AI boom—transforming from someone who hit the brakes into the one stepping hardest on the accelerator.
However, Aschenbrenner has not severed all ties with the crypto world. Instead, he has made the intersection of AI and crypto infrastructure a key investment focus.
According to SEC filings, the Situational Awareness Fund has established a substantial position in the bitcoin mining sector, holding stakes in bitcoin mining companies such as IREN, Core Scientific, Riot Platforms, CleanSpark, and Bitfarms. As of the first quarter of 2026, the fund’s disclosed holdings have grown from $5.5 billion to $13.67 billion.
Aschenbrenner’s investment thesis is not based on expecting Bitcoin’s price to rise, but rather on identifying a deeper structural opportunity: the industrial-scale power infrastructure and grid access held by Bitcoin miners.
In the United States, connecting a new data center to the grid typically takes three to five years. Bitcoin miners, however, already possess ready-made gigawatt-scale industrial power capacity and long-term energy supply agreements. As AI companies compete for limited power capacity, the grid access rights held by miners are becoming more valuable than Bitcoin itself.
Four: Leverage, Cycles, and Consolidation
The dramatic ups and downs of Situational Awareness reflect Silicon Valley's extreme approach to betting on future technologies in the global AI wave.
Fu Peng, Chief Economist of Bitfire Group, recently wrote that the AI industry is currently transitioning from the midstream to the downstream. The infrastructure layer, represented by NVIDIA, has entered a mature phase and exhibits characteristics of established stocks; however, the downstream application layer has yet to witness a milestone breakthrough akin to ChatGPT. The next 10 to 18 months represent a critical transition period in the industry cycle. The competition in the second half of AI will no longer be about repeatedly spending money to build infrastructure, but rather whether AI, as an efficiency tool, can generate consistent revenue, profits, and widespread adoption once integrated into real-world industries.
Fu Peng also emphasized the risks of leverage: when industry fundamentals are extremely certain and volatility drops to very low levels, the excessive buildup of off-balance-sheet financial leverage is often the hidden culprit behind sharp crashes. During deleveraging, even if a company’s fundamentals are sound, prices can still experience drastic fluctuations.
This is precisely the lesson Aschenbrenner paid $20 billion for.
Fu Peng also pointed out that current market funds are following a contraction logic, prioritizing the liquidation of peripheral, highly volatile speculative assets lacking cash flow support, while continuously concentrating toward the most core and highest-certainty assets. Pure liquidity assets like Bitcoin often absorb valuation pressures before traditional stock markets. Aschenbrenner’s forced liquidation may not only signify the fall of a genius but could also become a turning point in this AI market cycle.
Aschenbrenner acknowledged in the letter that the fund has removed all leverage. But this decision came too late—once leverage begins to be unwound, its damaging effects are irreversible.
This 25-year-old young man emerged from the ruins of FTX, departed amid controversy at OpenAI, spent two years building one of Wall Street’s most astonishing wealth legends—only to destroy it himself in six days. His story is both a vivid footnote to the AI-era frenzy and the most urgent warning about leverage and greed.