“AI stock guru” Leopold fund blowup behind the scenes: Abandons sale of Anthropic stake, turns to discounted sale of public stocks

Odaily News, August 1 — According to Wall St Engine, the liquidity pressure faced by “AI stock guru” Leopold Aschenbrenner's Situational Awareness fund during the July market crash has been detailed in new reports.

The report states that after the market rapidly cooled in mid-July, the decline in Situational Awareness's stock holdings triggered margin monitoring by banks such as Goldman Sachs and Morgan Stanley, leading to margin calls. Sources say that after other hedge funds learned of its positions, they began shorting the related stocks, creating a cycle of “price decline → margin call → forced selling → further price decline.”

In late July, Leopold, while attending his wedding in Carmel, continued negotiating with his team to keep the fund operational. On the evening of July 29, he reached a preliminary agreement with a consortium led by Greenoaks and Sequoia Capital to sell approximately $3.5 billion worth of Anthropic equity.

However, between the early morning of July 30 and the opening of U.S. markets, Leopold changed his mind, choosing to retain his private asset portfolio and instead sell public market stocks. Subsequently, Citadel and Millennium entered negotiations with the fund's team, and Citadel ultimately acquired the majority of the fund's public stock portfolio before Thursday's market open at a discount of more than 10% below market value.

The deal helped Situational Awareness meet its margin requirements and avoid an official default. After the transaction was completed, related AI and semiconductor stocks rebounded on Thursday, allowing Citadel to profit from the move.

Around July 31, Situational Awareness disclosed to investors that the fund posted a net loss of approximately 67% in July, though it remains up about 80% year-to-date. Leopold stated he takes “full responsibility” for the incident, adding that the fund has unwound its bank leverage and will continue operating and investing in public markets going forward, while also adjusting its portfolio management and risk control systems. (Wall St Engine)