AI Summary
5 min readIn late July, 24-year-old Leopold Aschenbrenner’s hedge fund, Situational Awareness, reported a 439% net return for the first half of the year. Six days later, the fund had collapsed from a peak of roughly $45 billion in assets to around $10 billion, and Aschenbrenner was forced to liquidate his entire public stock portfolio in a fire sale to Ken Griffin’s Citadel. The fund had used as much as 400% leverage to amplify bets on AI infrastructure, returning over 1,000% since inception. When those bets turned, the same leverage accelerated losses into a cascade that wiped the fund out. Michael Green, chief strategist at Simplify Asset Management, argues the implosion is not an isolated story about a young trader’s hubris. It is a case study in how leverage, market structure, and retail financial products are creating conditions for repeated blowups — and why the regulatory environment is failing to contain them.
How leverage turns a small decline into a total collapse
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What you'll learn
- 1 (02:40) **The Aschenbrenner Blow-Up: How It Happened** - The implosion of Leopold Aschenbrenner's fund, *Situational Awareness*, is introduced, detailing its 439% return followed by a $35 billion collapse and forced liquidation to Citadel.
- 2 (05:52) **Who Is to Blame? The 24-Year-Old or the System?** - Greene argues the blame lies not just with the young manager, but with the market structure that enabled the bet.
- 3 (06:22) **The Real Culprit: Leveraged ETFs and Volatility Drag** - The conversation shifts from the single fund to the broader market mechanism of leveraged ETFs, which Greene argues is driving semiconductor volatility.
- 4 (09:35) **Retail Investors Chasing a "Leopold-like Experience"** - The surge in retail buying of 3x and 2x single-stock ETFs is identified as a dangerous trend.
- 5 (10:52) **South Korea: A Case Study of Leveraged ETF Disaster** - The South Korean market crash is presented as a perfect example of how this mechanism goes wrong.
- 6 (11:36) **Should We Ban Leveraged ETFs?** - Greene pushes back on a total ban, arguing the tools are dangerous only when misused.
- 7 (14:26) **Are We Headed for a US Version of the South Korea Crash?** - The explosive growth of US leveraged ETFs ($218 billion AUM, up 60% since March) raises the alarm.
+ Full timestamped outline available in the app
Show Notes
Ed Elson is joined by Michael Green to discuss the role that leverage played in the turmoil with Leopold Aschenbrenner’s fund, Situational Awareness, and how leveraged-ETFs are impacting the semiconductor industry. Then, Katie Martin returns to break down why the U.S. intervened to help Japan with the yen and whether the U.S. is actually in a position to prop up the currency. Finally, Ed gives his take on Trump’s decision to sell early access to his social media posts.
Michael Green is the Chief Strategist and Portfolio Manager for Simplify Asset Management and author of the Yes I give a fig Substack. Katie Martin is a markets columnist and editorial board member at the Financial Times.
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