US regulators have approved the launch of a bank backed by a group of high-profile tech billionaires with ties to Donald Trump’s administration, seeking to fill a gap left by the collapse of Silicon Valley Bank.
The bank, Erebor, was founded this year by Palmer Luckey, co-founder of military contractor Anduril, and Joe Lonsdale, head of venture capital firm 8VC and a co-founder of data analytics firm Palantir. Its early backers also include Peter Thiel’s venture firm Founders Fund and Haun Ventures, a crypto-focused investor.
Like Anduril and Palantir, Erebor’s name is a reference to the fantasy world of JRR Tolkien. Erebor is the “lonely mountain” whose treasures are reclaimed from the dragon Smaug in The Hobbit.
According to its banking charter application, Erebor’s target market will be businesses that are part of the US “innovation economy” — particularly tech companies focused on cryptocurrencies, artificial intelligence, defence and manufacturing. It will also serve individuals who work for, or invest in, these companies.
“We want to be a stable, low-risk, reliable bank doing normal banking things without screwing everyone over with undue risk,” said a person close to Erebor.
Erebor was granted “preliminary and conditional” approval by regulators on Wednesday, just four months after its application for a national bank charter in June — a sign of the Trump administration’s initiative to lower regulatory hurdles and encourage new banking entrants focused on digital assets and services. The administration has encouraged new entrants to the banking sector including from technology groups, prompting a number of fintechs and cryptocurrency companies to seek bank charters this year.
The bank must still meet a number of requirements including checks on its compliance and security systems before it can officially open, which is expected to take several more months.
Luckey and Lonsdale were big donors to Trump in the 2024 presidential election, while Thiel was a backer of vice-president JD Vance.
An Erebor fundraising memo told prospective investors Luckey’s “political network” and the bank’s close ties to regulators would ensure it was approved by late 2025, according to a report by Business Insider in August. “Palmer’s political network will get this done,” the outlet quoted the memo as saying.
A person close to Erebor said there had been “no special treatment” from the Trump administration in the approvals process, adding that Luckey “had not been asked, nor made a single call in this capacity” to his contacts in the government. The person said the memo was “unauthorised” by the company.
Adam Cohen, a partner at law firm Skadden, who submitted Erebor’s bank charter application to the Office of the Comptroller of the Currency, recently left the firm to join the OCC, according to a post on his LinkedIn profile. Cohen is now chief counsel to OCC head Jonathan Gould.
In an announcement on Wednesday, Gould said Erebor was the first new bank to receive a preliminary conditional approval since he joined the OCC. “Today’s decision is also proof that the OCC under my leadership does not impose blanket barriers to banks that want to engage in digital asset activities,” he said.
Erebor is backed by $275mn of capital, the bulk of which is regulatory capital held in an account and will not be used for its operations. So far, all of its operations have been funded by Luckey, according to a person close to the matter. Its founders plan to raise more funding in the future to accelerate its expansion.
Its head office will be in Columbus, Ohio, with an additional office in New York, but it will offer digital-only customer service, marketing all of its products and services via a smartphone app and website.
Erebor’s co-founders decided to launch a bank after the collapse of Silicon Valley Bank in 2023. SVB had been the main bank for US tech start-ups and their venture capital backers.
Luckey’s start-up Anduril, which makes drones, sensors and other military technology, banked primarily with SVB prior to its collapse, according to a person close to the start-up.
Cryptocurrencies known as stablecoins, which are pegged to real-life assets such as the dollar, are expected to be a significant part of the bank’s operations. The Trump administration has also reversed a number of rules from the Biden administration limiting banks from stablecoin transactions.
Erebor “getting approval so fast is a reflection of its extremely conservative business plan”, the person close to the launch said. The person added that Erebor was not going to be a “wacky, techno crypto bank”.
Senator Elizabeth Warren, the top Democrat on the Senate banking committee, denounced the approval on Wednesday, calling Erebor a “risky venture that could set up another bailout funded by American taxpayers”.
“In a free market, credit flows fairly to businesses because they can use the money productively, not to the President’s cronies because of their political connections,” Warren said in a statement.
Erebor will be run by chief executive Owen Rapaport, co-founder and CEO of digital assets software company Aer Compliance, and chief strategy officer Jacob Hirshman, who previously worked as an adviser at crypto group Circle. Mike Hagedorn, former senior executive vice-president at New Jersey-based Valley National Bank, will be the bank’s president. Luckey and Lonsdale are not expected to be involved in the day-to-day running of the bank.