The Securities and Exchange Commission is probing the role of major banks, including Goldman Sachs, JP Morgan, Citigroup, and Bank of America, in the near-collapse of the hedge fund Situational Awareness.
This fund, led by former OpenAI researcher Leopold Aschenbrenner, experienced a dramatic drop in value after a tech sell-off forced it to unwind large, leveraged positions, resulting in significant losses. The fund's leverage reportedly reached up to 400%, raising concerns about the sustainability of such strategies in the AI investment landscape.
Citadel, a prominent multi-strategy hedge fund, intervened to purchase distressed assets from Situational Awareness at a discount, managing to offload about 80% of the associated risk thereafter. While the SEC's inquiry does not imply wrongdoing, it underscores the regulatory scrutiny surrounding high-profile funds that exhibit extreme volatility.
Situational Awareness has stated its commitment to cooperating with the investigation, reflecting the heightened regulatory environment for funds that leverage significant capital to achieve returns