SEC subpoenas Wall Street banks over Situational Awareness

The SEC has subpoenaed major Wall Street banks over their dealings with Situational Awareness, the hedge fund that got caught in last month’s AI stock rout, people familiar with the matter said. The regulator is looking for information tied to the fund’s trading activity, according to those people.

That matters because Situational Awareness was forced to dump many of its positions under pressure. It started liquidating some of its equity holdings after a wave of margin calls, and the unwind moved fast enough that Ken Griffin’s Citadel stepped in to buy most of its public stock bets.

The SEC has not said anything publicly, and a spokesperson declined to comment. That silence leaves plenty of room between a subpoena and a full-blown case. An SEC inquiry can end without any enforcement action at all, and the source material makes clear that being asked for records does not automatically make a firm or person the target.

Situational Awareness, for its part, is trying to frame the scrutiny as routine for a fund that drew attention and then suffered a sharp reversal. On Monday, it said regulators would naturally look closely at high-profile funds, especially ones with big returns or especially ugly drawdowns. It also said it would cooperate fully with any regulatory request.