The Securities and Exchange Commission (SEC) has sent subpoenas to major Wall Street banks over their dealings with Situational Awareness, the artificial intelligence hedge fund that nearly collapsed last month. According to the New York Times, three people briefed on the outreach described the requests to regulators who want trade timing data and lender communications. The subpoenas went to banks that cleared the fund's trades and financed its positions, with Bank of America, Citi, Goldman Sachs, and JPMorgan Chase ranking among its largest counterparties. Investigators asked for the timing of specific trades and requested messages the banks exchanged with the fund about borrowed money, telling them to preserve every record tied to the San Francisco firm.
Billionaire investor Ken Griffin's Citadel has shed more than 80%, or $4 billion, of bets from the original portfolio of Situational Awareness that it recently purchased, according to a letter to investors seen by Reuters. The AI-focused hedge fund, run by former OpenAI researcher Leopold Aschenbrenner, sold the bulk of its stock bets to Citadel last month after heavy losses in its tech holdings forced it to unwind most of its public equities portfolio. As per MarketScreener, Griffin confirmed the firm unwound more than 80% of aggregate risk from the Situational Awareness portfolio purchased in late July, executing over 100 block trades totaling more than $4 billion in market value. The latest filings reveal that Situational Awareness had held a $1.99 billion Bitcoin miner portfolio before its collapse, with Core Scientific being the largest holding at $666 million.
The Situational Awareness fund's miner holdings had grown rapidly, with miner exposure climbing 79% in a single quarter before the July collapse. According to the fund's latest 13F filing covering the period to June 30, Riot Platforms held $468 million, IREN $433 million, and CleanSpark $179 million. A fresh $152 million stake sat in Keel Infrastructure, the company that Bitfarms became after rebranding in April. These positions grew fast, with Riot alone jumping 229% during the quarter. However, the miner exposure represented only under 10% of the portfolio by the time of the sale, as the fund had shifted focus to memory chips and AI infrastructure.
The fund's collapse was triggered by a fundamental shift in its risk management strategy. At its peak, the fund ran more than $30 billion and borrowed tens of billions more before it broke. By June 30, the fund held $12.5 billion of outright long bets against Sandisk and Micron, with these two companies alone accounting for 55.6% of the entire book. The real danger lay in the fund's hedging strategy - in March, it held $8.5 billion of put options against Nvidia, Oracle, and Broadcom, but by June 30, these hedges had almost entirely gone. When AI names dipped in late July while traditional tech stocks the fund had shorted climbed, margin calls followed, the portfolio fell about 67%, and Citadel bought the public book at a roughly 10% discount.
Citadel has since completed nearly 100 block trades as it shed positions in the portfolio, which Griffin said included the largest intraday block trades of the year in 10 different names. The firm, which has about $77 billion of assets under management, declined to comment. Griffin stated in the letter that "Our ability to distribute this risk was central to our investment thesis. These moments highlight our ability to quickly evaluate complex risks, deploy capital with speed and conviction, and execute with precision." According to MarketScreener, Griffin credited the rapid transfer to the "extraordinary cooperation of the trading and prime brokerage teams at the banks serving both firms." The removal of the large seller has provided relief to the Bitcoin miner sector, as the fund had been sitting on top of these stocks for three weeks without selling. With Citadel's clearing of most of the miner positions, the sector is now back to its own fundamentals.
The SEC investigation may never produce a case, but the documents gathered could show how long the banks funded one concentrated AI bet before withdrawing credit. A Situational Awareness spokesman said scrutiny of this kind was predictable, stating "It is to be expected that regulators would closely examine any funds that are high profile, produce significant returns or have particularly dramatic drawdowns." The timing lands as bank executives flag hidden borrowing across markets, with JPMorgan chief Jamie Dimon warning this month that margin debt hit records. Situational Awareness still holds a stake in Anthropic, which is weighing a public listing, that position now stands as the clearest measure of what survived July.
