The US Securities and Exchange Commission has issued subpoenas to several Wall Street banks that worked with AI-focused hedge fund Situational Awareness, seeking information about its trading activity and use of leverage before its near-collapse last month, according to a report by Reuters.
The regulatory inquiry follows the fund’s decision to sell most of its publicly traded holdings to Citadel after a sharp selloff in global semiconductor stocks triggered margin pressure on its leveraged positions.
The report cites unnamed people familiar with the matter as saying that the SEC is examining the timing of trades that led to margin calls, as well as communications between Situational Awareness and some of its largest lenders. Those banks include Goldman Sachs, JPMorgan, Citigroup and Bank of America.
The SEC and the banks reportedly declined to comment.
Situational Awareness said in a statement that regulatory scrutiny of a high-profile fund following an extreme drawdown was to be expected and that it would cooperate fully with any requests from authorities.
The issuance of subpoenas does not necessarily mean the regulator has concluded that wrongdoing occurred. Information requests can form part of routine regulatory examinations and do not by themselves indicate that any of the banks or the hedge fund is the target of an enforcement action.
