The U.S. Securities and Exchange Commission has opened an investigation into Situational Awareness, an AI-focused hedge fund, over trades executed in July that contributed to sharp losses in the broader market.
The regulator is examining the timing and rationale behind the fund’s positions during the period of heightened volatility, according to a person familiar with the matter. The probe also includes scrutiny of the fund’s communications with lenders regarding its use of leverage to amplify trading activity.
Situational Awareness, which relies on artificial intelligence-driven trading strategies, has not been accused of wrongdoing, and the investigation remains in its preliminary stages. The SEC’s focus centers on whether the fund’s trades were executed in compliance with market rules and disclosure requirements.
The July market turbulence saw significant declines across major equity indices, with losses exacerbated by leveraged positions held by several funds. Situational Awareness’ trades were among those flagged for their outsized impact on market movements during the period.
A spokesperson for the SEC declined to comment on the investigation. Representatives for Situational Awareness did not respond to requests for comment.
