SEC Situational Awareness probe has widened after regulators subpoenaed Bank of America, Citi, Goldman Sachs and JPMorgan Chase over the hedge fund’s near collapse, according to a New York Times report. The requests seek details on trade timing and talks with lenders about borrowed money. Regulators also told the banks to keep related records.
The inquiry is still at an early stage. However, the move marks a clear rise in scrutiny after one of the year’s sharpest hedge fund reversals. The fund has not been accused of wrongdoing, and officials have not said what conduct they are reviewing.
SEC Situational Awareness Probe Expands
Situational Awareness, an AI-focused hedge fund, lost about two thirds of its portfolio value in July. The fund was founded in 2024 by Leopold Aschenbrenner, a former OpenAI researcher. Through June, it had returned more than 1,000% from launch and grew to manage more than $30 billion, while borrowing tens of billions more.
At the end of June, the fund held about $5.7 billion of SanDisk and about $5.6 billion of Micron. Together, those positions made up more than 56% of its U.S. portfolio. In July, SanDisk fell nearly 47% and Micron dropped about 29%. As a result, margin calls forced a sale of the public equity portfolio to Citadel at about a 10% discount.
Citadel Unwound Most of the Risk
Citadel then moved to cut the risk from the acquired holdings. Ken Griffin told clients that the firm had unwound more than 80% of the total risk in three weeks. It did so through more than 100 block trades worth over $4 billion. He also said only Citadel could have delivered a fix of that size in that time.
Meanwhile, the purchase helped Citadel’s flagship multistrategy fund post its best monthly result since 2022. A Citadel spokesman declined to say if the firm had also received a subpoena. Situational Awareness said it would fully cooperate with any regulatory request and added that such scrutiny can follow high-profile funds or steep drawdowns.
The fund still holds a stake in Anthropic, which has discussed a possible listing at a valuation that could reach $2 trillion.
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Source: InvestingLive
