Palmer Luckey Backs New Crypto-Friendly Banking Startup

Palmer Luckey, the 32-year-old founder of the rapidly growing defense company Anduril, is now supporting a bold banking startup aimed at transforming the finance sector, according to sources from The Post.

The initiative, tentatively named “Erebor,” after the mountain where the dragon Smaug hoards gold in J.R.R. Tolkien’s “The Hobbit,” is focused on providing stability for Silicon Valley. Its primary mission is to assist tech entrepreneurs in developing their businesses rather than maximizing deposit returns.

In addition to cash resources, Erebor intends to manage deposits in stablecoins—digital currencies whose values are pegged to stable assets like the US dollar or gold. Luckey, whose net worth is estimated by Forbes at $3.6 billion, is collaborating on this venture with tech investor Joe Lonsdale, as reported.

Lonsdale’s venture capital firm, 8VC, is spearheading a $225 million fundraising effort to meet federal regulatory standards for the new bank. Details about the post-money valuation of the startup are not yet available.

Although Luckey will be a co-founder, he is not anticipated to hold an executive position or manage day-to-day operations. The founding team and other firms involved in the initial funding round have not been disclosed yet.

Discussions regarding Erebor began shortly after the unexpected collapse of Silicon Valley Bank in 2023, which was a premier financial institution for tech startups. The bank’s failure, due to rising interest rates, left many clients unable to access their funds. The federal government intervened to guarantee deposits and prevent a wider financial crisis.

By offering stablecoin deposits, Erebor aims to provide continuous service even during bank holidays, enhancing flexibility for startups. Recent trends show increasing acceptance of stablecoins as a less volatile investment compared to traditional cryptocurrencies. The group is also exploring alternatives to conventional banking practices, considering measures like a cap on loan-to-debt ratios to maintain financial stability.