Situational Awareness hedge fund meltdown was a warning shot for leveraged markets, BofA CEO says

Situational Awareness, the hedge fund co-founded by former OpenAI researcher Leopold Aschenbrenner, has injected a $400 million investment into an undisclosed company amidst a financial crisis. The fund's assets plummeted approximately 78% in July following an AI-stock sell-off that triggered margin calls from Wall Street lenders.

In July, Situational Awareness had already invested $100 million in the same unnamed company, as reported by Bloomberg based on information from sources familiar with the situation. The latest injection of capital was finalized on Tuesday.

The fund's troubles began when the AI-stock crash led to significant losses, with its assets dropping sharply. Situational Awareness faced pressure to repay its lenders and had to consider selling stakes in private companies to stay afloat, according to a report in the Financial Times.

To address the financial strain, Situational Awareness sold a majority of its public equity portfolio to Ken Griffin’s Citadel, enabling it to meet its obligations and preserve its investments in private companies. The fund had been heavily involved in power and data centers supporting AI, including Bitcoin miners who were also expanding into AI computing.

A filing with the US Securities and Exchange Commission from May 18 provided insight into the fund's holdings as of March 31, revealing a significant $1.11 billion investment across seven Bitcoin mining stocks, including IREN, Core Scientific, Riot Platforms, and CleanSpark.