Washington: The U.S. Securities and Exchange Commission (SEC) has opened an investigation into the trading activity of AI-focused hedge fund Situational Awareness, focusing on the timing of trades that contributed to steep losses during the July market meltdown, according to a source familiar with the matter.
The regulator is also examining the fund’s communications with lenders concerning its use of leverage, raising questions about how the heavily leveraged trades were managed as AI and technology stocks plunged.
Situational Awareness, led by former OpenAI researcher Leopold Aschenbrenner, suffered a dramatic setback in July after its portfolio lost about 67% of its value amid a sharp sell-off in AI-related stocks. The fund subsequently sold most of its public-equity portfolio to Citadel in an emergency transaction.
The SEC’s scrutiny comes as regulators also seek information from major Wall Street banks that dealt with the fund. Reports indicate that subpoenas were sent to Goldman Sachs, JPMorgan, Citigroup and Bank of America, seeking details about the fund’s trades and financing arrangements.
The investigation is reportedly in its information-gathering stage. The SEC probe does not mean Situational Awareness has been accused of wrongdoing or that charges have been filed.
The collapse has drawn intense attention across Wall Street because the fund’s losses were linked to concentrated and leveraged bets on AI-related stocks, while its trading turmoil also affected major market participants. Reuters previously reported that Jane Street suffered a significant hit tied to its exposure to Situational
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