Big Banks Subpoenaed Over Hedge Fund Run by 24-Year-Old

A hedge fund that soared on the AI boom and then stumbled hard is now on the SEC's radar. Regulators have issued subpoenas to banks that financed Situational Awareness, a San Francisco firm run by 24-year-old Leopold Aschenbrenner, seeking details on its trading and borrowing practices, sources familiar with the matter tell the New York Times. The SEC, which declined to comment, hasn't accused the fund of any wrongdoing. The banks involved include Citi, JPMorgan, Goldman Sachs, and Bank of America.

"The debacle has cast light on the various ways in which leverage is increasingly underpinning the wider AI boom," notes CNBC. At its height, Situational Awareness managed more than $30 billion and used heavy leverage to amplify its bets on AI-linked stocks. Reuters reports, however, that the portfolio value of the fund fell 67% in July alone, and when those shares slipped and old-guard tech names it had shorted climbed, losses mounted and the fund dumped most of its portfolio to Citadel at a discount. "We came closer to permanent capital impairment than is acceptable to us," Aschenbrenner wrote in a letter to investors. The firm still holds a stake in AI startup Anthropic, which is eyeing a blockbuster IPO, per the Times.