Situational Awareness, the AI-focused hedge fund that was Wall Street's fleeting obsession, is having a very bad month. The company, led by twentysomething OpenAI alum Leopold Aschenbrenner, went all-in on a variety of AI investments and enjoyed phenomenal growth. Then, at the end of July, a downturn in AI stocks wiped out billions of dollars in value at the firm. Now, federal regulators are reportedly probing the company as well.
SEC subpoenas banks
The New York Times reported that the Securities and Exchange Commission has been subpoenaing banks that did business with the hedge fund. The subpoenas focus on the banks that supervised the fund's trading and that channeled funding to support it, the outlet says. The government reportedly warned the banks to "preserve any information" about the hedge fund, though it noted that Situational Awareness has not been accused of any wrongdoing.
Situational Awareness did not respond to TechCrunch's request for comment but told the Times that scrutiny of high-profile funds is to be expected, and that it would "cooperate to the fullest extent with any regulatory request."
A cautionary tale
The company, which very publicly hitched its wagon to AI's star, may serve as a cautionary tale about the industry's supposedly unstoppable trajectory. The investigation adds regulatory scrutiny to the financial losses the fund has already suffered, raising questions about the risks of concentrated AI investing and the oversight of AI-driven trading strategies.