The Bank for International Settlements (BIS) highlighted the near-collapse of the Situational Awareness hedge fund as a systemic risk example. Founded by former OpenAI researcher Leopold Aschenbrenner in 2024, the fund focused on AI and semiconductor stocks using 4x leverage. Following a market downturn in July 2026, the fund faced margin calls from prime brokers including Goldman Sachs and JPMorgan Chase.
On July 30, 2026, the fund executed a fire sale of assets worth approximately $16 billion to Citadel to eliminate its leverage. The portfolio value dropped by 67%, reducing assets under management from a peak of $45 billion to $10 billion. Following these events, JPMorgan reduced its lending relationship, and the fund partnered with Clear Street.
The SEC has issued subpoenas to Wall Street banks to investigate the trading practices and leverage associated with the fund. The BIS warned that such non-bank financial intermediaries can amplify market shocks through forced selling. While the fund continues to operate, it faces ongoing regulatory scrutiny and the challenge of rebuilding its capital base.
