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‘Situational Bewareness’: Star AI Investor Dumps Assets To Citadel After Massive Levered Bets Blow Up

by | Jul 30, 2026 | Top Ten


Summary:

  • In echoes of Archegos chaos from 2021, Situational Awareness – a once $45BN tech fund – has been forced to liquidate its public share holdings due to margin calls from TRS

  • Ken Griffin’s Citadel scooped up the portfolio (at a health discount we are sure) as counterparties forced the liquidation.

  • The fund is now around $10BN (all private holdings)

  • Leopold – the fund manager – is getting married this weekend to Anthropic’s Chief of Staff

*  *  *

Update (1500ET): Wondering who was involved? Below we highlight the holdings of Sandisk and circled bank/dealer positions (Morgan Stanley, Goldman, Jane Street, JPM, BNP, UBS, Deutsche, BofA etc.) who are all typical total return swap counterparties. 

As a reminder, they hold the physical shares; clients get the economic exposure and leverage synthetically.

*  *  *

Update (1130ET): The Wall Street Journal reports that Situational Awareness, the highflying artificial-intelligence-focused hedge-fund firm, sold the bulk of its stock portfolio to Ken Griffin’s investment firm Citadel after suffering deep losses, according to people familiar with the matter.

There were other bidders for the firm’s public equities book, which included large positions in AI hardware stocks such as Nebius and Sandisk.

Citadel rival Millennium and Situational Awareness investor Jane Street both put in their own offers, people familiar with the situation said.

But, ‘Big Ken’ saved the market again (and his own book).

According to the same ‘people familiar’, Situational Awareness did not sell its private portfolio of AI companies, which includes a significant stake in Anthropic.

Aschenbrenner’s fiancée also works for the leading AI company.

From assets under management above $45 billion less than a month ago, Situational Awareness’s AUM is reportedly now back below $10 billion…

Not so wunderkind after all?

Perhaps Leopold should have listened to Ken Griffin’s warnings from a couple of years ago?

As @GoshawkTrades wrote on X:

A 24-year-old ex-openai researcher ran a fund to $45 billion with eight people, was up 439% net through june, and by the end of july had sold his entire public stock portfolio to ken griffin in a single block trade.

griffin described this exact failure mode two years ago, asked why portfolio managers wash out at citadel:

“you have a portfolio that is extraordinarily highly concentrated, you have large positions, you cannot demonstrate a clear and concise competitive advantage in why you own those positions.”

“and there are some people that just, with full information, are unable to help themselves and get to a better portfolio construction.”

he was also asked the opposite question in the same interview, why citadel keeps working, his third and final answer was this:

“it’s experience. it’s the price paid in losses and pain that converts into wisdom. my leadership team, we’ve been through a lot of very difficult moments of the markets together. we’ve learned some very bitter lessons. but it makes us much more effective as investors in periods of turmoil and crisis.”

citadel started in november 1990. situational awareness started in 2024, long AI infrastructure and short software at roughly 4x leverage. both legs went against it in the same three weeks.

there was no bitter lesson priced into that book yet.

that’s what got bought.

he wasn’t wrong about AI. he was wrong about the construction of his book.

Here’s Ken…

*  *  *

Update (1000ET): Situational Awareness has exited all of their public investments, CNBC’s David Faber reports on air, citing people familiar with the situation.

Faber reports that the liquidation was done “through one enormous trade.”

Roughly two-thirds of the assets under management at Situational Awareness were public equities, both that he owned on the long side and that he was shorting, Faber says.

That could help explain the panic bid in Nasdaq this morning, as investors may believe the overhang from this unwind is over…

…do you really think that Leopold was the only ‘smartest man in the room’ that was using TRS to massively lever into momentum?

*  *  *

In 2020/2021, one fund almost single-handedly used massive amounts of leverage to drive several big media and tech stocks dramatically higher.

That fund – Archegos – run by the now infamous Bill Hwang – used Total Return Swaps (TRS) to build massive levered positions on the back of de minimus capital (and even more notably, without everyone seeing how much he really owns because these were ‘off-balance-sheet’ swaps).

For a while, everything was awesome.

The prime brokers were earning their interest and Archegos was making bank, Hwang was a genius, as the shares rose on the back of their own virtuous buying circle.

But then, one day in March 2021, one of his big stocks (ViacomCBS) suddenly drops a lot because the company sold more shares.

The banks came knocking for some more collateral to cover the losses (which were huge due to the leverage), but Archegos didn’t have the cash (and they had been using TRS from a number of brokers – none of which knew about – creating a systemic crisis). 

The prime brokers were forced to liquidate the holdings (first one to sell wins), and the result was the escalator up in shares became an elevator down (see chart above) in a number of the names that Archegos was holding.

Since then we have had a few scares, but in general, banks have improved their risk management process (a number of risk managers were fired over Archegos).

But, the money that primes can make from the interest and the incessant momentum of the AI bubble perhaps became too much to miss out on… especially when you know other competitors are doing ‘the thing’.

All of which brings us to the last month…

About six weeks ago, we raised a big red flag that something was going on as soaring funding costs suggested the banks were offering significant leverage…

The last few weeks have seen dramatic unwinds of a number of the highest-flying AI-related names (and the total collapse of momentum)…

Put those two things together and we smelled a TRS-Tantrum.

Overnight, we may have found the first culprit caught in this over-levered trap.

Situational Awareness, a hedge fund launched by former OpenAI employee Leopold Aschenbrenner that manages around $20 billion, is seeking new money after facing losses linked to declining AI stocks, the Financial Times reported.

Situational Awareness (SA) said in an investor letter dated July 24 outlining its half-year performance that it had “not been immune” to the market moves, including in Asia, but added that the dynamic had created opportunities for investment, the FT reported. The hedge fund was up 439% on a net basis this year through the end of June, the paper said. 

The fund engaged existing investors and lenders in discussions on raising capital, according to the FT, which cited unidentified people briefed on the matter.

“PS. At times we call out opportunities that seem like a particularly good time to add funds, if you have been waiting for one,” he said in the investor letter, seen by the FT, which was sent in recent days and offered the ability to invest new cash on August 1.

Some investors have been offered the option to purchase assets in its portfolio, the newspaper added.

The talks were described as ad-hoc by one of the people.

As Bloomberg reports, some of the fund’s largest holdings have slumped in recent weeks.

Shares of AI-focused cloud platform Nebius Group NV, in which the fund disclosed a multi-billion-dollar position in May, have dropped 48% from a peak last month, wiping around $35 billion from the company’s market value.

In March, Situational reported a large position in Sandisk Corp., which has fallen 56% in just over a month, and another in SharonAI Holdings Inc., which is down by a similar margin since mid-June.

Do those charts look familiar?

Look again at the PARA chart at the top – pumped and dumped by Archegos.

CNBC’s David Faber reported this morning that several of the firm’s prime brokers – including Bank of America, Goldman Sachs and JPMorgan Chase – have been working with the fund as it seeks to meet margin requirements or reduce positions in an orderly fashion, according to people familiar with the discussions.

The brokers have been marketing a group of the firm’s holdings on both the long and short side for sale prior to today’s start of trading, according to people familiar with the situation.

These reports have been denied by the fund.

Martin Shkreli (consider the source), confirms that SA is down 50% MTD and that Goldman is liquidating…

In around 15 days, the next set of 13Fs will drop and we will discover which dealers have the most TRS exposure on their books.

As a reminder, Bill Hwang was sentenced to 18 years in prison…





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