The U.S. Securities and Exchange Commission (SEC) has subpoenaed four Wall Street banks, seeking information about the trading activity of hedge fund Situational Awareness. Goldman Sachs, JPMorgan Chase, Citigroup, and Bank of America were among the fund’s primary lenders. The subpoenas were reported by Bloomberg, Reuters, and Fortune, citing people familiar with the matter.

What Happened

The regulator is seeking information about the fund’s trades and its use of leverage. The SEC has requested emails and other communications between the banks and Situational Awareness regarding borrowed funds, as well as details on the sequence of trades that led to margin calls.

The situation escalated in July, when a global selloff in AI and semiconductor stocks triggered a sharp decline in the value of the fund’s holdings. Its portfolio lost 67% during the month. Following a series of margin calls, Situational Awareness was forced to sell the bulk of its publicly traded equity portfolio to Citadel and stop using leverage.

What We Know About Situational Awareness

The fund was founded in 2024 by Leopold Aschenbrenner, a former OpenAI researcher who gained prominence for a series of essays on the future of artificial intelligence. Situational Awareness focuses on investments tied to the growth of the AI industry, including semiconductor manufacturers, technology infrastructure companies, and energy businesses.

Before the July selloff, the fund had posted extraordinary returns: it gained roughly 439% in the first half of 2026. Even after its portfolio fell 67%, the fund remained up approximately 80% for the year, according to Reuters.

In a statement to the media, Situational Awareness said: “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 fund added: “We are a highly-regulated business and will cooperate to the fullest extent with any regulatory request.” (Reuters)

What It Means

An SEC spokesperson declined to comment. The issuance of subpoenas does not mean the regulator has found wrongdoing by the fund, the banks, or any individuals, nor does it necessarily indicate that enforcement action will follow. The inquiry could conclude without further legal action.

Still, the Situational Awareness case has drawn attention across the financial industry to the risks associated with significant leverage at funds making concentrated bets on the AI sector. The July selloff demonstrated how quickly falling stock prices can trigger a cascade of margin calls, forced asset sales, and regulatory scrutiny.