SEC Probes Banks Behind Hedge Fund’s AI Bet Blowup

The U.S. Securities and Exchange Commission (SEC) has asked banks for records tied to their lending to a hedge fund that nearly collapsed. The fund had used borrowed money to multiply its bets on artificial intelligence (AI) stocks. Regulators are looking into how the banks structured that financing and whether they flagged the risks. The probe focuses on the chain of loans that let the fund take on outsized positions without enough cash behind them. The SEC’s request is part of a broader review of leverage in AI-driven trading. Officials want to know if lenders failed to spot the fund’s mounting exposure before its positions turned toxic. No charges have been filed. The inquiry is in its early stages, and the banks are cooperating. The near-collapse has rattled markets already nervous about frothy AI valuations. The outcome could shape new rules on how much borrowed money hedge funds can use for concentrated tech bets. For now, the SEC is gathering facts—and the banks are bracing for tougher questions.