U.S. SEC Investigates AI Hedge Fund’s Discount Liquidation Amid Collapse

Huo Xing Cai Jing reports that on August 25, according to The New York Times, the U.S. Securities and Exchange Commission (SEC) is investigating the recent near-collapse of the AI hedge fund Situational Awareness and has issued subpoenas to major Wall Street banks that participated in the fund’s trading and provided leveraged funding. According to sources familiar with the matter, the SEC has requested that the banks provide details on the timing of the fund’s trades and all communications regarding borrowed funds, and has instructed them to preserve all materials related to the fund. Situational Awareness was founded by Leopold Aschenbrenner, a former researcher at OpenAI, and previously achieved high returns amid the AI hype. At its peak, the fund managed over $30 billion in assets and borrowed hundreds of billions to amplify its investments. However, at the end of last month, as stock prices of popular AI companies declined and traditional tech stocks it had shorted rose, the fund’s losses rapidly expanded, forcing it into a “fire sale” liquidation, during which it sold the majority of its portfolio at a discount to Citadel. The SEC stated that the investigation is still in its early stages and does not imply any wrongdoing. Situational Awareness has not been accused of any violations, and the fund has stated it will “fully cooperate with any regulatory requirements.”