SEC subpoenas banks over AI fund’s near-collapse

The U.S. Securities and Exchange Commission has issued subpoenas to multiple Wall Street banks that worked with AI-focused hedge fund Situational Awareness, seeking records on the fund’s trading activity and use of leverage ahead of its near-collapse last month.

The subpoenas target banks that acted as lenders and counterparties to the fund, naming Goldman Sachs, JPMorgan Chase, Citigroup and Bank of America. Regulators asked for documents showing the timing of trades that triggered margin calls and for communications between the fund and its largest lenders.

The inquiry follows a sharp selloff in global semiconductor stocks that increased losses on the fund’s leveraged positions. Facing margin calls, Situational Awareness sold most of its publicly traded holdings to Citadel as losses mounted and liquidity tightened.

The SEC’s review will examine when trades were placed relative to market moves, the structure of credit lines or margin facilities, risk controls and any communications about margin calls or liquidity support. Subpoenas are used to collect records to reconstruct trading activity and counterparty arrangements and do not by themselves indicate a finding of wrongdoing.

The SEC and the banks declined to comment. In a statement, Situational Awareness said it would ‘cooperate fully with any requests from authorities’ and provided no further detail on the trades or lender communications.