[vessenes]

This is everywhere. For reference, former FTXer and OpenAIer raised $225m into a hedge fund structure, went long and short, and reportedly peaked at $40bn of value; leverage bit hard this week and they sold their entire-ish portfolio to Citadel at $10bn. (Which, I imagine was very likely aiming at this outcome in their trading in the last few weeks).

Not reported anywhere -- was additional money raised in to the fund, and what is the LP basis? The story might be: wunderkind 40x+ed his first hedge fund and sold it to Citadel, or it might be: wunderkind raised $20bn and turned it into $10bn fast trading against Citadel.

Inquiring minds want to know!

[Diogenesian]

I strongly suspect it's closer to the latter; CNBC says they had to sell rapidly to meet margin requirements and it couldn't be confirmed if they actually succeeded. Suggests there was a lot more than $250m in collateral on the line.

https://www.cnbc.com/2026/07/30/leopold-aschenbrenners-hedge...

[reisse]

Nah, if they reinvested realized profit they can still be in the green overall

[tyre]

You’re talking about the same fund.

They were open about their gains. It was the margin calls and illiquidity that got them, not going negative. Some of their assets, like Anthropic stock, isn’t worthless, it’s just illiquid.

[andy_ppp]

“isn’t worthless” is still to be decided IMO. Until you can sell it it defines worthless!

[mrandish]

WSJ earlier reported that SA had a deal Wednesday night to sell their Anthropic stake to Citadel for $10B in cash but on Thursday morning backed out and decided to instead sell public equitities in their portfolio at what was reported as "a more than 10% discount."

[swyx]

some people should be too dumb to be allowed to comment on anything

[victorbjorklund]

You can sell it on secondary market? I’m sure many investors are bound up but there are transactions there.

[mrandish]

Per another WSJ article: https://www.wsj.com/finance/leopold-aschenbrenner-situationa...

"The fund had gained about 270% after fees this year through May. At that point, it was up more than 1,000% after fees since inception. It had ballooned to well over $20 billion under management, reaching the size of other well-known hedge funds that took decades to build."

So, down 67% in July but that was after already being up more than 1000% from the beginning up through May.

https://www.marketwatch.com/story/pioneering-ai-hedge-fund-w...

> "Research boutique Citrini posted some commentary on the potential developments at Situational Awareness on X Thursday. The post sought to downplay the gravity of the situation and opined that investors are likely to give Aschenbrenner the benefit of the doubt. “To put that into perspective, if you invested $100M with SALP at inception and wiped out ninety percent in July, your investment would be worth $230M,” said Citrini."

[EvgeniyZh]

He claims 80% ytd profits, and there are speculations that Citadel got their whole public portfolio, so the remaining 10-15b are all private (and marked in unknown way) including ~5b in Anthropic, those who invested early in the year probably still in green (assuming there is liquidity for other private investments, which probably there is given it's AI stuff)

[animal_spirits]

If you owe someone 10 thousand dollars that’s a big problem for you. If you owe someone 10 billion dollars that’s a big problem for them

[anon48293]

That depends entirely on the value of your assets

[changoplatanero]

Say more about how citadel made this happen with their trading?

[infecto]

Firms like citadel will run crowding analytics, who owns what, at what leverage and rough margin trigger points. Over simplifying but they could be shorting the longs and going long on the shorts. Everyone generally knew situational was heavily levered.

[vessenes]

To be clear, I'm not claiming Citadel created double digit drops in SK Hynix / Samsung. I am saying that as market vol hits, vol traders might choose to make it worse. And when word hits the street someone has a liquidity position, prop traders WILL come and pressure. SA's filings were clear how concentrated they were, and this was known. In this case, Citadel (hedge fund) bought, while I imagine Citadel Securities would have been doing this (speculated upon) trading. We'll know more when the filings come out though. I'll be curious what of the portfolio they kept and what they worked / rolled in the market

[Ekaros]

It really sounds like market manipulation... But oh well it is the biggest boys doing it so it can't be that illegal... Free markets and everything for them right?

[victorbjorklund]

Short squeezing is legal. No need to protect short sellers from the market.

[bad_haircut72]

Im not a trader but my understanding was that some traders at Citadel heard a rumor these guys were exposed, which gave Citadel an advantage because they knew they would have to liquidate? That doesnt sound like market manipulation to me, just trading with all the information you have

[quickthrowman]

Situational Awareness filed a 13F that lists a hedge fund’s long and short positions with the SEC. It’s public information, forcing an overleveraged fund to liquidate by pressuring the instruments they’re exposed to is not market manipulation, leverage cuts both ways and all of the people/institutions involved are professional/sophisticated investors

Here are all the SEC filings from Situational Awareness courtesy of SEC’s EDGAR: https://www.sec.gov/edgar/browse/?CIK=0002045724

[BoorishBears]

There's something amusingly circular about these conversations, because clearly laypeople like me and the person you responding to are saying "that sounds like it shouldn't be allowed" and the invariable responses are always "it is allowed!"

The comment literally says it: "it can't be that illegal"

[tomp]

You make it sound like a conspiracy theory but it's just rational behaviour.

Large amount of leverage / shorting / concentrated bets in a single stock => increase probability of large swings in that stock's price => bigger risk of sudden market moves => bigger risk to market makers => market makers limit their exposure.

[mrandish]

Per a different WSJ article: https://www.wsj.com/finance/leopold-aschenbrenner-situationa...

> "Over the past week, traders at major hedge funds and other firms began sharing information about Situational’s exposure, with some placing short bets against its top holdings, hoping to profit as Aschenbrenner sold his positions to raise cash, according to two people close to the situation.

The short bets by the rivals weighed on Situational’s portfolio. Meanwhile, tech shares like SK Hynix were sliding. Over the three trading days ending Tuesday of this week, hedge funds reduced their positions at a scale not seen in three years, according to Goldman Sachs."

Having created (or at least amplified), the short squeeze on SA's position "Citadel executives reached out to Aschenbrenner, saying that the firm could be helpful if he needed ways to raise cash."

> "Aschenbrenner partially blamed short sellers who targeted the firm’s positions for exacerbating the fund’s losses"

[jvsg_]

Citadel spread the rumor that the Fed was going to hike rates this week. This led to Situational Awareness getting margin called on their longs.

[moralestapia]

Quite similar to CZ and FTX.

[energy123]

That's a meme conspiracy theory on twitter that nobody in the industry takes seriously.

[jvsg_]

Please educate me what exactly is the conspiracy theory here. Are you saying it is beneath Citadel to play this trick?

[energy123]

The cause and effect don't make sense because Citadel putting out such an opinion moves the entire market by only a few basis points which barely impacts what you're saying they're trying to impact. It's one of those narratives that sounds good because it's "Citadel" in both cases, which makes it go viral on social media among people who don't know what they're talking about, but it isn't coherent.

[moralestapia]

Wow, so, he narrowly avoided prison while at FTX, then went to work for Scam Altman, now does "investment funds" (a classic trope).

The guy really really really wants to end up in prison, lol.

[mrandish]

> he narrowly avoided prison while at FTX

Apparently, he worked in charitable giving at FTX and had nothing to do with the shady investments. He was never charged and there's no sign he was even investigated. Beyond SBF, only a handful of people were in on the scam and charged.