The Securities and Exchange Commission has issued subpoenas to banks involved with Situational Awareness, an AI-focused hedge fund that nearly collapsed late last month. Regulators are seeking details on the firm's trading timing and communications regarding its heavy borrowing, or leverage. The S.E.C. also warned these institutions to preserve all relevant information concerning the San Francisco-based entity.

At its peak, the fund managed over $30 billion and borrowed tens of billions more from major financial institutions including Bank of America, Citi, Goldman Sachs, and JPMorgan Chase. Founded two years ago by Leopold Aschenbrenner, a former OpenAI researcher, the firm capitalized on the AI boom using complex instruments that amplified both gains and losses. When AI stock prices dipped and traditional tech shares rose, the fund faced significant drawdowns.

Consequently, Situational Awareness was forced into a fire sale, liquidating most of its portfolio to rival Citadel at a discount. While no wrongdoing has been alleged, the investigation highlights regulatory scrutiny of high-profile funds with dramatic performance swings. A spokesman stated the firm will cooperate fully with any regulatory requests.

Despite the turmoil, the fund retains hope through its stake in Anthropic, an AI company planning an IPO potentially valued at $2 trillion. Notably, Mr. Aschenbrenner’s wife serves as chief of staff to Anthropic CEO Dario Amodei.