A major US-based artificial intelligence hedge fund, Situational Awareness, was forced to sell a substantial portion of its public stock holdings this week following a severe liquidity crunch triggered by a sharp downturn in technology stocks.

The fund's founder, Leopold Aschenbrenner, struck an emergency deal with Citadel founder Ken Griffin, selling off the majority of the fund's public equity assets. The high-leverage investment portfolio of Situational Awareness was hit hard by the recent sell-off in US tech stocks. According to documents, core holdings such as Bloom Energy and Sandisk have fallen by approximately 40% since the end of June.

To cover massive losses, Aschenbrenner aggressively sold Intel stock on July 23, sparking market speculation about the sell-off. Subsequently, concerned about the fund's concentrated investment structure and high credit risk, its major Wall Street prime brokers repeatedly demanded additional margin and placed the fund on a risk watchlist.

Facing a cash crunch, Aschenbrenner sought a rapid liquidation of assets. After cutting off communication with some investors on Wednesday night, the fund began urgent negotiations with several Wall Street institutions, including Citadel, Millennium Management, and Jane Street Capital. Ultimately, Citadel took over most of the public equity positions, which had previously been valued at up to $16 billion.

The fund is now seeking to sell its private equity stake in the startup Anthropic at a premium, and plans to retain only a small, unleveraged stock position. Before this crisis, Situational Awareness had seen its assets under management swell to over $20 billion, driven by aggressive bets on AI-related companies.

On July 24, Aschenbrenner wrote to investors reporting a book return of over 400% for the first half of the year, while warning of the potential for future market volatility. However, as its financial situation rapidly deteriorated, the fund was forced to ask different investors for emergency assistance and discounted asset sales, ultimately failing to prevent the core holdings from being sold off.

Aschenbrenner, 24, previously worked at the US AI company OpenAI. Commenting on the event, one Wall Street professional involved in the negotiations noted that the capital markets should reflect on the systemic risk of providing massive funding and credit to individuals and institutions lacking real trading experience and robust risk management infrastructure.