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Hello fintech friends,
There’s nothing like some summer markets drama.
Financial markets completed an up-and-down July with a major hedge fund drawdown.
Leopold Aschenbrenner's AI-focused fund, Situational Awareness, was forced to unwind its public stock holdings after a brutal July for AI stocks turned its leveraged bets sour, with long positions like SK Hynix sinking while short bets against software names like Adobe moved against it.
To get a sense for how wild SA’s story is: “Aschenbrenner had no professional investing experience when he launched his AI-focused firm […] less than two years ago, with a few hundred million dollars. […] Situational Awareness has gained about 270% after fees this year through May and is up more than 1,000% after fees since inception.”
The fund ballooned to as much as $45 billion (!) in AUM after a 439% return through June.
But leverage played a big role: The 439% first-half return wasn't just from picking better stocks; it came from applying leverage to a crowded, correct-so-far AI trade.
Driving the sell-off in AI stocks: Early in the week, South Korea’s benchmark KOSPI index suffered a brutal two-day rout.
On Tuesday, July 28, the KOSPI plunged 10.84%, followed by another massive drop on Wednesday that triggered consecutive market-wide circuit breakers. (For anyone who missed the last couple months of KOSPI news… Korean markets saw dizzying growth this year as individual investors took out personal loans and mortgages to pile into aggressive single-stock leveraged ETFs tracking Samsung and SK Hynix).
As Seoul’s equity market erased trillions in value, emergency meetings were called between the Ministry of Finance, the Bank of Korea, and financial regulators. Just as things looked bleakest, the market pulled off a jaw-dropping reversal: today, the KOSPI soared a record-breaking 17.9% in a single day.
But the reversal wasn’t quick enough for Aschenbrenner. Facing a 67% drawdown, SA approached existing investors and lenders for fresh capital as prime brokers Bank of America, Goldman Sachs, and JPMorgan worked to help it meet margin calls.
In the end, Ken Griffin’s Citadel bought the bulk of SA’s public equity portfolio in a single block trade. And those positions are reportedly up 29% in the few days since their acquisition.
And as always with Citadel, the conspiracy theories abound: “Citadel predicted a surprise Fed rate hike, which historically tanks the market. Situational Awareness gets margin called. Fed left rates unchanged. Citadel acquires Leopold's entire portfolio. Same day, Leopold's holdings rally 15% to 29%.” (Similar to the theories when Terra / Luna collapsed…)
Aschenbrenner will live to fight another day, as he holds onto his stake in Anthropic and keeps roughly $10 billion in assets on SA’s books. In financial markets, the AI revolution trade continues!
Enjoy another week of fintech and financial news below.
- Nik
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The Rundown
🏦 Financial Services & Banking
BNY unveiled a blockchain-based digital transfer agency, which will move fund ownership records on-chain via mint/burn capabilities for fiat and stablecoin subscriptions (a business that today handles $8.6 trillion in assets.) Baillie Gifford, BlackRock, and Dreyfus are lined up as early users.
Nine major financial firms, including BlackRock, Coinbase, and Fidelity Digital Assets, pledged $15 million over three years to launch the Bitcoin Security Consortium, funding open-source developers independently rather than through a pooled fund.
🚀 Product Launches
Digital payments and banking API provider Increase launched its own bank, Increase Bank, built on its own home-grown core technology so tat tech companies' systems can talk directly to the bank's. Customers like Gusto, Ramp, and Stripe already move over $500B through Increase's infrastructure.
X began a limited US rollout of X Money, its payments app. X Money will give Premium and Premium+ subscribers a deposit account, P2P payments, and a Visa debit card, with deposits held at Cross River Bank.
tastytrade launched its own set of Prediction Markets. The markets will give traders access to CFTC-regulated event contracts powered by Apex Fintech Solutions' FCM infrastructure (the first brokerage to go live on it).
Juniper Square debuted Fay, an AI Admin Oversight Agent that runs 150+ checks on fund administrator deliverables.
💸 Miscellania
Upstart received conditional approval from the OCC to establish Upstart Bank, N.A. — a branchless, Delaware-based national bank that would let the AI lender originate loans nationwide.
Crypto billionaire Justin Sun escalated his legal fight with the Trump family's World Liberty Financial (fun!) accusing co-founder Chase Herro and other executives of freezing his tokens and threatening to burn them after he refused to pour more money into the project; World Liberty countersued him for defamation.
🤝 Partnerships
😞 The Bad News
The OCC rejected Wise's bid to become a nationally chartered trust bank in the US, citing "significant supervisory and compliance concerns,” sending Wise shares down more than 10% and marking the first public denial of a major fintech's national trust charter under the Trump administration.
Crypto exchange BitMart announced it will wind down after nine years, halting all trading by August 26 and fully closing by January 2027, sending its BMX token down 58%.
BitMEX also shut down operations after 11 years, closing the exchange that pioneered the 100x-leverage perpetual swap following a strategic review and the recent departure of its CEO, CFO, and head of growth.
Visa confirmed it is cutting about 2,600 jobs, roughly 7% of its workforce, mostly in technology and product roles.
UK customers of Barclays, Lloyds, Halifax, HSBC, Monzo, and Revolut reported widespread transfer and payment glitches, with Faster Payments delays and missing funds prompting a spike in outage reports.
A judge rejected Zelle operator Early Warning Services' bid to toss New York Attorney General Letitia James's lawsuit.
The Stablecon Agenda is now live — join us on September 9th in DC.
Quote of the Week
“Same Day ACH grew about five times faster than ACH overall last quarter, up nearly 30% to 435.7 million payments worth $1.3 trillion. Online payments cleared 3 billion in a single quarter for the first time. […] If you're building on ACH, the rail underneath you is getting faster and scaling with you. ” — Brian Dammeir
Job of the Week
Watch of the Week
That’s all for this week! Enjoy your weekend. — Nik
Introducing Increase Bank, Member FDIC - the bank for ambitious technology companies.
Banking services provided by Increase Bank, Member FDIC. Technology services provided by Increase Technologies, Inc., a non-bank company.
Companies like Gusto, Ramp, and Stripe already rely on Increase's API-first banking technology to process more than $500B annually. Their developers choose to build on infrastructure that passes high-fidelity data straight from the financial networks, without abstractions. Those same principles are true at Increase Bank, Member FDIC.
