South Korea, welcome to the wild world of Leverage!

"Smart Men Go Broke From Ladies, Liquor, And Leverage". Charlie Munger

The Asian country just learned this lesson the hardest way possible. The KOSPI surged 116% to an all-time high by June 2026, fueled by AI chip mania around Samsung and SK Hynix. 

😈 Then regulators greenlit single-stock leveraged ETFs in May, products promising 2x, 3x, even 5x daily returns. Retail investors piled in with margin loans, pushing total margin debt to ₩38.6 trillion. 92% of leveraged ETF holders were retail.

💀 When AI sentiment soured and SK Hynix reported weaker earnings, the feedback loop detonated. 

👎Samsung plummeted 32%. 

👎SK Hynix crashed 40%. 

👎The KOSPI fell 25% into a bear market. 

👎Over ₩2.3 trillion in forced liquidations hit in just two months. 

Goldman Sachs estimates roughly 1 in 30 working-age adults received a margin call. The human cost is so severe that South Korea rolled out a debt counseling hotline as part of its suicide prevention plan. Regulators have now banned new listings and tripled minimum deposits, closing the barn door after the horses have bolted.

But this isn't just a Korea story.

Enter Leopold Aschenbrenner, the 25-year-old former OpenAI researcher who launched the "Situational Awareness" hedge fund. Up 439% this year, he was hailed as "AI Jesus" by FinTwit. 

⚠️The truth? He was running 4x leverage into concentrated AI infrastructure bets. When the selloff hit, his $45 billion fund faced margin calls from prime brokers at Goldman Sachs, Bank of America, and JPMorganChase. He was forced to liquidate his entire public equity book, longs and shorts, in a single block trade to Ken Griffin's Citadel.

📉 The fund lost 67% in one month. 

💡The lesson is timeless: leverage on the way up feels like genius. On the way down, it turns you into a forced seller, and the market always knows when you're a forced seller. It gives you the worst possible price.

💡Whether you're a retail investor in Seoul betting your wedding fund on a 3x Samsung ETF, or a celebrated hedge fund manager levered 4x into AI names, the math doesn't care about your IQ. It only cares about your margin cushion.

💡South Korea's parliament called the leveraged ETF launch a "man-made disaster." I'd call it something older: the oldest mistake in finance.

"Leverage doesn't just create risk, it totally removes your margin of being wrong!" Federico Carrasco

P.S.

Leopold Aschenbrenner, gained fame with Situational Awareness: The Decade Ahead, a 165-page essay predicting AGI, mapping the path to superintelligence, outlining "AGI realism," and warning that the U.S. must defend against Russian and Chinese AI. Once provocative, these ideas are now common knowledge. 

His reputation as an investing savant, fund up 439%, hailed as "AI Jesus", was less genius than it appeared: he ran 5x leverage into AI momentum while married to Anthropic's Chief of Staff, creating suspicion of privileged information rather than foresight. 

When the trade turned, margin calls forced total liquidation to Citadel. Like South Korea's retail leverage disaster, his collapse proves that access isn't "alpha" and leverage isn't strategy.