S.E.C. Investigating Near-Implosion of A.I. Hedge Fund

“It is to be expected that regulators would closely examine any funds that are high profile, produce significant returns or have particularly dramatic drawdowns,” a Situational Awareness spokesman said in a statement. “We are a highly regulated business and will cooperate to the fullest extent with any regulatory request.”

The S.E.C. declined to comment.

At its peak, Situational Awareness managed more than $30 billion, and borrowed tens of billions more. It was a major client of firms including Bank of America, Citi, Goldman Sachs and JPMorgan Chase, according to a regulatory filing.

Spokespeople for Bank of America, Citi, Goldman Sachs and JPMorgan declined to comment.

Situational Awareness had a fast rise and an even quicker retreat. Founded just two years ago by Leopold Aschenbrenner, a former researcher at OpenAI, it rode the A.I. boom to soaring investment returns.

To achieve those results, however, the fund relied on heavy borrowing, as well as complicated and expensive financial instruments that magnify gains — and losses. The latter piled up quickly last month when the stock prices of publicly traded, high-flying A.I. companies dipped. At the same time, shares in more traditional technology companies — which the hedge fund had been betting against — rose, compounding the problem.

Situational Awareness was forced into a fire sale. It wound up selling most of its stock portfolio to a rival, Citadel, at a discount.

Article source: https://www.nytimes.com/2026/08/24/business/sec-situational-awareness-investigation.html