SEC subpoenas 4 banks in Situational Awareness probe after 67% portfolio wipeout

Investing.com -- The SEC has subpoenaed Bank of America, Citi, Goldman Sachs and JPMorgan Chase as part of an early-stage investigation into the near-collapse of Situational Awareness, the AI-focused hedge fund that saw roughly 67% of its portfolio value wiped out in July, the New York Times reported Monday, citing three people briefed on the outreach.

The subpoenas seek details on the timing of Situational Awareness’s trades and its communications with lenders about borrowed money, or leverage, according to the Times. Regulators also warned the banks to preserve any information related to the San Francisco-based fund. Spokespeople for all four banks declined to comment, as did the SEC.

The inquiry centers on a fund that had a spectacular rise and an equally spectacular fall. Founded in 2024 by Leopold Aschenbrenner, a former OpenAI researcher who is now approximately 26, Situational Awareness grew to manage more than $30 billion while borrowing tens of billions more to amplify its bets on AI-linked chip stocks. Returns exceeded 1,000% from launch through June 2026, per background reporting. Then July arrived. Situational Awareness held a $5.7 billion stake in SanDisk and $5.6 billion in Micron at end of June, together representing more than 56% of its U.S. portfolio, according to the New York Post. SanDisk fell nearly 47% and Micron dropped roughly 29% that month, triggering margin calls and a fire sale of the public equity portfolio to rival Citadel at a roughly 10% discount, per Financial Times reporting.

The fund’s forced unwind of a multi-billion-dollar Micron stake in July was among the largest single-name liquidations tied to the episode, making any SEC finding on trade timing or leverage directly relevant to Micron’s shareholder base.

Citadel, for its part, moved quickly. Ken Griffin told clients in a letter dated August 21, reported by the Financial Times, that Citadel had already unwound more than 80% of the aggregate risk from the Situational Awareness portfolio it purchased, executing more than 100 block trades worth over $4 billion in three weeks. Griffin’s flagship Wellington multistrategy fund posted a 5.94% return in July, its best monthly performance since 2022, aided in part by the rescue purchase, according to Investing.com. "Only Citadel could have delivered a solution of this scale on this timeline," Griffin wrote in the letter, as reported by the New York Post. A Citadel spokesman declined to confirm or deny whether the firm also received an SEC subpoena, the Times noted.

Situational Awareness, for its part, struck a cooperative tone. "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 fund spokesman said in a statement to the Times. "We are a highly regulated business and will cooperate to the fullest extent with any regulatory request."

The SEC has a well-established practice of scrutinizing investment firms involved in large, sudden losses, and has brought civil cases against such firms in the past. But any investigation remains at its earliest stages, with no guarantee it leads to fines or punishment, and the fund has not been accused of wrongdoing. The specific concern underpinning the subpoenas — whether regulators are examining potential market manipulation, disclosure failures, prime-broker conduct, or something else — has not been made public.

Situational Awareness still has a lifeline: it retained its private stake in Anthropic while selling off its public equity book. Anthropic is targeting an IPO at a valuation of up to $2 trillion. The connection runs deeper than finance; Aschenbrenner’s wife serves as chief of staff to Anthropic CEO Dario Amodei.

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