Quite the funny headline. It initially made me think that someone had come up with some sort of quantitative measure of the situational awareness of traders, and was claiming that there was an increase in traders making dumb trades that misread the situation or something.
Ironically, I would describe this selloff as an increase in situational awareness.
Well, effectively that is kinda what it is saying, although it's the situational awareness of one particular trader it's referring to. The situational awareness of Citadel who scooped up their portfolio at fire sale prices seems quite good!
I would definitely be interested in seeing someone come up with some kind of “situational awareness” index, to evaluate how much the market actually knows about what it’s investing in.
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.
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.
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.
Believe it or not, you are legally bound to act in the interests of shareholders.
Though you cannot be pardoned from civil stuff, and the options to actually prosecute are pretty slim, so I doubt it.
Though, even if this is just tongue-in-cheek, you can literally buy a pardon in America right now with just a little bit a money into the pockets of the Trump family, in case you didn't get the joke (that the US government is literally pro-corruption right now).
I say this with absolutely no evidence and only stating it as a hypothetical. But as an example it would be plausible that insider trading was involved.
Since when does HN discussion appreciate unfounded accusations? Stop blowing smoke.
Yes going down threads of discussion but not calling insider trading without any evidence. The fund was massively levered, that is a large part of the reason it did so well.
What I was specifically pointing at was it being a heavy AI play combined with the direct relationships he has at high levels with AI companies. For instance the chief of staff to Anthropic's CEO.
What I was specifically referring to was a hypothetical that he could need a pardon. There was a question on what possible crime could be involved.
All that said, I'd imagine if this was really happening that we wouldn't have today's headline in the first place.
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
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.
> Aschenbrenner party blamed short sellers who targeted the firm’s positions for exacerbating the fund’s losses, the letter said. The letter compared Situational’s experience to a bank run.
4 years ago, it was SBF blaming Changpeng Zhao for shorting FTT and triggering a run on FTX.
Now another EA has followed the path of making a lot of money relatively quickly and losing it just as fast, using the exact same arguments for why it happened.
>Now another EA has followed the path of making a lot of money relatively quickly and losing it just as fast
let's be clear here - he didn't actually "lose" a ton of money. he was up 439% net in the first half of 2026.
his issue was getting margin called due to being short on software (which went up) and long on AI infra (which went down) - getting margin called != losing money.
> let's be clear here - he didn't actually "lose" a ton of money. he was up 439% net in the first half of 2026.
He's down 67% on the month. He most certainly lost alot of money.
He'll be fine and i think he'll be successful at raising more money, and he's still up on the year as far as I've been told by LP's, but he sure did lose alot of money this month.
Aren’t month over month gains and losses aren’t particularly surprising nor noteworthy when you’re operating a leveraged fund? Shouldn’t one expect higher volatility, but also higher returns?
yes, monthly returns are expected to be volatile for a fund like this.
No in that, no LP wants 2/3rd down months. That kind of swing is insane.
That' means any LP that invested in the past 3 moths is completely wiped out, as in their full investment into the fund is at zero.
Now most LP's are probably investors for 6 months or more so they'll be ok.
What I'd be worried about is that if its true that he liquidated his entire public portfolio and only holds privates, where are the returns going to come from when anthropic is currently valued at what it is likely to go public at, and where is investor liquidity going to come from when they want to redeem.
He looks like he's turning his fund into a venture capital fund, which might be for the best given that he seems good at that and poor at running a hedge fund that invest in public securities.
Yes he lost a ton of money. He went from being up as much as you said to up only 80% and getting liquidated at that point. If it weren’t for Citadel stepping in to buy his investments who knows how much worse it could have gotten.
The only thing you can argue is realized vs unrealized.
>Now another EA has followed the path of making a lot of money relatively quickly and losing it just as fast, using the exact same arguments for why it happened.
I would be very interested to know what he did with the management and performance fees (and how much they were) he gathered over the last 3 years. Just the perf fees from 2025 are probably enough to set him up for life. If he reinvested not so great.
> I would be very interested to know what he did with the management and performance fees
I mean, I'm pretty sure he pocketed the money and got richer. Most hedge fund compensation structure has always (ironically, I'd add, given the name "hedge" fund) incentivized volatility over long term performance.
Sounds like someone took huge risks, incurred huge losses, and thought they were entitled to always win. It honestly feels good seeing these folks get knocked down a peg.
An inexperienced portfolio manager that’s never seen a down tech market in his life has created a massively leveraged position on frothy assets in a bubble and the bubble is looking ill. What could possibly go wrong.
Many of these AI plays are massively entangled and leveraged. It all looks good until it doesn’t and when there’s a hiccup things unravel quickly and exponentially. I fully expect in the next 12 months we’re going to see some rather spectacular investment implosions with folks losing their shirts. Get your popcorn ready.
A barometer of the mania and one for the history books. A 23 year old wunder-kind publishes a 156 page prophesy with a catchy title which was lapped up by the silicon valley elite and funded to the tune of 10s of Billions. And, not sticking to his lane, the wunder-kind enters the finance world thinking his brilliance translates there too, and he was promptly taken to the woodshed by the wall street sharks.
You’re missing the core story which is that they don’t have a returns crisis they have a liquidity crisis. Finds don’t blow up because they have bad returns. Funds implode because they have no cash to cover their calls and other needs for cash.
But that's not what they want to see. They want to see that AI is a savior for all. The psychosis of what AI is, especially in these comment walls, is unfortunately and spectacularly real.
Anyone who's done any amount of investment can see this through the lens of history and I'm right there with you. This is the Lehman Brothers stage of the game and SA could be that "one". But Bro, we're still up 80%! - even WSB isn't filled with this level of ignorance.
> Situational’s gains earlier in the year were so large that, even including July’s losses, the fund remains up about 80% on the year, the letter said.
Equally interesting to me is how Citadel made up a rumor about the FED raising rates at this weeks FOMC meeting causing a historic selloff in AI stocks which then allowed them to pick up Situational Awareness on the cheap.
I really don't like this guy, seriously he's a shark (he's probably right, but what a jerk): "If you know somebody has to liquidate, the best thing you have to do, unfortunately, sadly, Darwinian is to go sell all the positions you have in common, then start shorting everything they have. It accelerates the downfall as quickly as you can." of course then he says 'It's nothing I would ever do...'
If there's any purpose in hedge funds as a structure it's that they provide liquidity for the market. So it's in everyone's best interest to let them do price discovery against each other.
Using leverage has risks that you're supposed to understand before you do it.
It's not a free lunch, unless you're putting the sharks' interest ahead of yours. Or clueless, which was the case here, as L.A. is not a trader and has no business running a fund.
Too bad for the people that were overleveraged? I don’t see why, they assumed too much risk and lost. This isn’t a WSB guy blowing up, it’s a collection of capital from sophisticated investors that understand the risks.
Martin was convicted on three counts of securities fraud. The TL;DR is he was shilling a successful fund while sitting on massive losses. A Madoff kinda thing.
This has nothing to do with what people actually hate him for, and for which he was not convicted, because extracting money from a captive clientele is exactly what the US healthcare system is designed to do.
Why do you think that just sharing a link to an earlier HN post means 'promoting' someone? I referenced the HN post because I found that it's less about Martin Shkreli himself and more about a quality conversation with good analysis about the inner workings of 'Hedge fund' world and market dynamics.
If you've a better source, share it; I'll have a look and might use that one in the future. Otherwise, if you can't contribute in a constructive manner, stop making baseless comments about others intention without understanding them first.
He's an absolute ghoul, and to see sibling comments praising him breaks my heart. Yeah, he "did his time", but he also took advantage of sick people for immense profit. You don't get a pass for that.
Deja-vu from dot-com. The tech-wreck had similar hedge-fund road-kill. Munder net-net fund comes to mind. A lot of hubris and leverage on a thesis that is not proven, and liquidity matters. Data-center debt will likely see similar debris in the next several years.
> Despite the July losses, Situational Awareness remains up about 80% on the year and holds a portfolio of investments in private companies including Anthropic.
80% return (YTD) is the type of performance for which many hedge fund managers would sacrifice their first born.
He played his cards well given the incentives. Most investors wouldn't tolerate such recklessness, and accordingly, most funds have to operate under strict risk management or they don't get funded. PMs at multi managers are only allowed about 5-8% drawdowns.
Leopold's public visibility gave him access to dumb money whales who allowed him to personally profit off the variance by collecting bonuses when times were good, leaving the investors with the bag when the blow up happens. These investors got lucky that there were still gains after the margin call. Being up 80% after such a large drawdown is bad performance on a risk adjusted basis and is not distinguishable from chance due to the magnitude of the variance.
https://archive.ph/PCjtG
Quite the funny headline. It initially made me think that someone had come up with some sort of quantitative measure of the situational awareness of traders, and was claiming that there was an increase in traders making dumb trades that misread the situation or something.
Ironically, I would describe this selloff as an increase in situational awareness.
Ha yes it definitely reads like an Onion headline.
Well, effectively that is kinda what it is saying, although it's the situational awareness of one particular trader it's referring to. The situational awareness of Citadel who scooped up their portfolio at fire sale prices seems quite good!
I would definitely be interested in seeing someone come up with some kind of “situational awareness” index, to evaluate how much the market actually knows about what it’s investing in.
It'd only really work retrospectively, but would be quite fun to see. Especially ones that investigate previous bubbles.
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!
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...
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.
Either way he ended up with enough money for a pardon
Pardon for what? The crime of losing money?
Good for one free crime of your choice
Anything he wants!
Believe it or not, you are legally bound to act in the interests of shareholders.
Though you cannot be pardoned from civil stuff, and the options to actually prosecute are pretty slim, so I doubt it.
Though, even if this is just tongue-in-cheek, you can literally buy a pardon in America right now with just a little bit a money into the pockets of the Trump family, in case you didn't get the joke (that the US government is literally pro-corruption right now).
Believe it or not, you are legally bound to act in the interests of shareholders.
Though a common Internet trope, this is incorrect. However, “legally” or not, you might find yourself unemployed should you ignore the shareholders.
what law are you insinuating Aschenbrenner broke?
I say this with absolutely no evidence and only stating it as a hypothetical. But as an example it would be plausible that insider trading was involved.
Then why state it?
Because Hacker News appreciates discussion of the theoretical, that exceeds the bounds of what mainstream society thought was possible.
Since when does HN discussion appreciate unfounded accusations? Stop blowing smoke.
Yes going down threads of discussion but not calling insider trading without any evidence. The fund was massively levered, that is a large part of the reason it did so well.
What I was specifically pointing at was it being a heavy AI play combined with the direct relationships he has at high levels with AI companies. For instance the chief of staff to Anthropic's CEO.
What I was specifically referring to was a hypothetical that he could need a pardon. There was a question on what possible crime could be involved.
All that said, I'd imagine if this was really happening that we wouldn't have today's headline in the first place.
trust us, it's quite clear you have no knowledge about the topic you are speaking on.
Say more about how citadel made this happen with their trading?
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
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.
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.
That's a meme conspiracy theory on twitter that nobody in the industry takes seriously.
Quite similar to CZ and FTX.
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.
> Aschenbrenner party blamed short sellers who targeted the firm’s positions for exacerbating the fund’s losses, the letter said. The letter compared Situational’s experience to a bank run.
4 years ago, it was SBF blaming Changpeng Zhao for shorting FTT and triggering a run on FTX.
Now another EA has followed the path of making a lot of money relatively quickly and losing it just as fast, using the exact same arguments for why it happened.
>Now another EA has followed the path of making a lot of money relatively quickly and losing it just as fast
let's be clear here - he didn't actually "lose" a ton of money. he was up 439% net in the first half of 2026.
his issue was getting margin called due to being short on software (which went up) and long on AI infra (which went down) - getting margin called != losing money.
> let's be clear here - he didn't actually "lose" a ton of money. he was up 439% net in the first half of 2026.
He's down 67% on the month. He most certainly lost alot of money.
He'll be fine and i think he'll be successful at raising more money, and he's still up on the year as far as I've been told by LP's, but he sure did lose alot of money this month.
Aren’t month over month gains and losses aren’t particularly surprising nor noteworthy when you’re operating a leveraged fund? Shouldn’t one expect higher volatility, but also higher returns?
yes, monthly returns are expected to be volatile for a fund like this.
No in that, no LP wants 2/3rd down months. That kind of swing is insane.
That' means any LP that invested in the past 3 moths is completely wiped out, as in their full investment into the fund is at zero.
Now most LP's are probably investors for 6 months or more so they'll be ok.
What I'd be worried about is that if its true that he liquidated his entire public portfolio and only holds privates, where are the returns going to come from when anthropic is currently valued at what it is likely to go public at, and where is investor liquidity going to come from when they want to redeem.
He looks like he's turning his fund into a venture capital fund, which might be for the best given that he seems good at that and poor at running a hedge fund that invest in public securities.
Yes he lost a ton of money. He went from being up as much as you said to up only 80% and getting liquidated at that point. If it weren’t for Citadel stepping in to buy his investments who knows how much worse it could have gotten.
The only thing you can argue is realized vs unrealized.
>Now another EA has followed the path of making a lot of money relatively quickly and losing it just as fast, using the exact same arguments for why it happened.
I would be very interested to know what he did with the management and performance fees (and how much they were) he gathered over the last 3 years. Just the perf fees from 2025 are probably enough to set him up for life. If he reinvested not so great.
> I would be very interested to know what he did with the management and performance fees
I mean, I'm pretty sure he pocketed the money and got richer. Most hedge fund compensation structure has always (ironically, I'd add, given the name "hedge" fund) incentivized volatility over long term performance.
Even Wirecard – a fraudulent German bank missing some billions of euros and run by a Russian spy – always blamed bad press.
Denials mean nothing.
Sounds like someone took huge risks, incurred huge losses, and thought they were entitled to always win. It honestly feels good seeing these folks get knocked down a peg.
An inexperienced portfolio manager that’s never seen a down tech market in his life has created a massively leveraged position on frothy assets in a bubble and the bubble is looking ill. What could possibly go wrong.
Many of these AI plays are massively entangled and leveraged. It all looks good until it doesn’t and when there’s a hiccup things unravel quickly and exponentially. I fully expect in the next 12 months we’re going to see some rather spectacular investment implosions with folks losing their shirts. Get your popcorn ready.
> What could possibly go wrong
A barometer of the mania and one for the history books. A 23 year old wunder-kind publishes a 156 page prophesy with a catchy title which was lapped up by the silicon valley elite and funded to the tune of 10s of Billions. And, not sticking to his lane, the wunder-kind enters the finance world thinking his brilliance translates there too, and he was promptly taken to the woodshed by the wall street sharks.
I'd be excited for the show myself if I had any idea how to prevent my portfolio from tanking when this clusterfuck finally unravels.
>Even including July's losses, the fund remains up about 80% on the year
Spectacular blowup and a lesson on leverage, but let's not miss this line.
You’re missing the core story which is that they don’t have a returns crisis they have a liquidity crisis. Finds don’t blow up because they have bad returns. Funds implode because they have no cash to cover their calls and other needs for cash.
But that's not what they want to see. They want to see that AI is a savior for all. The psychosis of what AI is, especially in these comment walls, is unfortunately and spectacularly real.
Anyone who's done any amount of investment can see this through the lens of history and I'm right there with you. This is the Lehman Brothers stage of the game and SA could be that "one". But Bro, we're still up 80%! - even WSB isn't filled with this level of ignorance.
It's hopeless, people see what they want to see.
> Situational’s gains earlier in the year were so large that, even including July’s losses, the fund remains up about 80% on the year, the letter said.
80% return is still excellent.
Equally interesting to me is how Citadel made up a rumor about the FED raising rates at this weeks FOMC meeting causing a historic selloff in AI stocks which then allowed them to pick up Situational Awareness on the cheap.
I like how Matt Levine formulated it.
His thesis was correct. The problem is, his thesis was measured in years if not decades when his funding was measured in days and hours.
Earlier on HN:
Martin Shkreli breaks down the collapse of Situational Awareness - https://news.ycombinator.com/item?id=49119380
Edit: added context
Why are you promoting content by Martin Shkreli? You know, the guy who committed securities fraud to rip off desperate patients?
I really don't like this guy, seriously he's a shark (he's probably right, but what a jerk): "If you know somebody has to liquidate, the best thing you have to do, unfortunately, sadly, Darwinian is to go sell all the positions you have in common, then start shorting everything they have. It accelerates the downfall as quickly as you can." of course then he says 'It's nothing I would ever do...'
That’s truly the playbook when you are on the other side of a levered firm though.
Yeah, probably. Its too bad.
If there's any purpose in hedge funds as a structure it's that they provide liquidity for the market. So it's in everyone's best interest to let them do price discovery against each other.
Why too bad? This is how the market ultimately comes to the right price.
Not really.
Using leverage has risks that you're supposed to understand before you do it.
It's not a free lunch, unless you're putting the sharks' interest ahead of yours. Or clueless, which was the case here, as L.A. is not a trader and has no business running a fund.
Too bad for the people that were overleveraged? I don’t see why, they assumed too much risk and lost. This isn’t a WSB guy blowing up, it’s a collection of capital from sophisticated investors that understand the risks.
Because hn is primarily about competence, knowledge and tech, which Martin has in spades.
The arguments against him barely hold water in general anyway.
A federal jury sure thought they held water.
Martin was convicted on three counts of securities fraud. The TL;DR is he was shilling a successful fund while sitting on massive losses. A Madoff kinda thing.
This has nothing to do with what people actually hate him for, and for which he was not convicted, because extracting money from a captive clientele is exactly what the US healthcare system is designed to do.
So competent sociopaths get their roses on HN? Good to know.
lmao
He has done more for wallstreet-to-mainstreet transparency than you believe.
His investor literacy youtube backlog is unusually deep and as of yet has only shilled his own trading product.
But your point is valid, he will never live down the fraud conviction and his face is so punchable.
The shady crypto projects he did after his release are also good reasons to distrust the guy
Why do you think that just sharing a link to an earlier HN post means 'promoting' someone? I referenced the HN post because I found that it's less about Martin Shkreli himself and more about a quality conversation with good analysis about the inner workings of 'Hedge fund' world and market dynamics.
If you've a better source, share it; I'll have a look and might use that one in the future. Otherwise, if you can't contribute in a constructive manner, stop making baseless comments about others intention without understanding them first.
He's an absolute ghoul, and to see sibling comments praising him breaks my heart. Yeah, he "did his time", but he also took advantage of sick people for immense profit. You don't get a pass for that.
You can still learn from thieves and crooks. Especially if they break down what they did and how they did it.
Just keep in mind you might be the mark of his current scheme
Like black hats getting cyber sec jobs, they probably know a thing or two.
If you’re gonna be a hater you at least gotta do it right! The pricing and the securities fraud were two separate things you can count against him.
He is one of the few folks in finance who regularly streams and is directionally interesting. He served his time.
I don't think those two cases are related
he's a relatively well known figure in finance and pharma investing
He has served his time for those crimes
Because he’s an expert.
Edit: I don't do podcasts but this is absolutely worth some of your time to watch.
seems like someone who is knowledgeable about financial shenanigans
Can you provide a comparable or superior analysis by someone else?
Deja-vu from dot-com. The tech-wreck had similar hedge-fund road-kill. Munder net-net fund comes to mind. A lot of hubris and leverage on a thesis that is not proven, and liquidity matters. Data-center debt will likely see similar debris in the next several years.
Worth noting, even with the margin call, he's still up 80% on the year: https://www.ft.com/content/a0a5e3a7-c4e6-42a6-9a7b-a780422bc...
Situational Awareness. Fitting name.
Where do I sign up to get $100M to dump into long AI positions?
Which AI stocks suffered a rout?
SPCX is getting lower and lower, MSFT is currently down 15% in an year, Oracle is close to 50% YoY...
Incredible that the founder is engaged to be wed this very weekend to the chief of staff to Anthropic's CEO
Yesterdays news. High leverage. Sounds like citadel got a deal.
And yet:
> Despite the July losses, Situational Awareness remains up about 80% on the year and holds a portfolio of investments in private companies including Anthropic.
80% return (YTD) is the type of performance for which many hedge fund managers would sacrifice their first born.
Shocking to see a highly levered and highly concentrated fund blow out /s
He played his cards well given the incentives. Most investors wouldn't tolerate such recklessness, and accordingly, most funds have to operate under strict risk management or they don't get funded. PMs at multi managers are only allowed about 5-8% drawdowns.
Leopold's public visibility gave him access to dumb money whales who allowed him to personally profit off the variance by collecting bonuses when times were good, leaving the investors with the bag when the blow up happens. These investors got lucky that there were still gains after the margin call. Being up 80% after such a large drawdown is bad performance on a risk adjusted basis and is not distinguishable from chance due to the magnitude of the variance.