Regulators are intensifying scrutiny of banks’ relationships with trading firms and hedge funds after the near-collapse of Situational Awareness, an AI-focused hedge fund run by former OpenAI researcher Leopold Aschenbrenner. Jane Street recorded a roughly $15 billion trading loss in July 2026 amid a reversal in AI and chip stocks, with losses compounded by the fund’s forced sale of most of its public-equities portfolio to Citadel Securities. The Federal Reserve and Bank of England are asking global banks about exposures to major trading firms, intraday risk changes and internal controls, while the SEC has subpoenaed major Wall Street banks over Situational Awareness’ trading, leverage and lender communications. The review extends to market makers and proprietary trading firms including Citadel Securities, as supervisors assess whether banks hold sufficient liquidity against risks from non-bank clients.