U.S. regulators have approved the creation of a bank backed by a group of prominent tech billionaires with ties to President Donald Trump’s administration to fill the void left by the collapse of a Silicon Valley bank.
The bank, Erebor, was founded this year by Palmer Lackey, co-founder of military contractor Anduril, and Joe Lonsdale, head of venture capital firm 8VC and co-founder of data analytics firm Palantir. Early backers include Peter Thiel’s venture firm Founders Fund and crypto-focused investor Hawn Ventures.
Like Anduril and Palantir, Erebor’s name is a reference to the fantasy world of JRR Tolkien. Erebor is the “solitary mountain” where treasure is recovered from the dragon Smaug in The Hobbit.
According to the company’s bank charter application, Erebor’s target market will be companies that are part of the U.S. “innovation economy,” particularly high-tech companies with a focus on cryptocurrencies, artificial intelligence, defense and manufacturing. We also serve individuals who work for or invest in these companies.
“We want to be a stable, low-risk, reliable bank that conducts normal banking operations without ruining everyone with unreasonable risks,” said a source close to Erebor.
Erebor received “preliminary and conditional” approval from regulators on Wednesday, just four months after applying for a national bank license in June. This is a sign of the Trump administration’s efforts to lower regulatory hurdles and encourage the entry of new banks focused on digital assets and services. The administration has encouraged new entrants into the banking sector, including from technology groups, with many fintech and crypto companies seeking banking charters this year.
The bank will need to meet a number of requirements, including compliance and security system checks, before it can officially open, which is expected to take several more months.
Mr. Lackey and Mr. Lonsdale were major donors to Mr. Trump in the 2024 presidential election, and Mr. Thiel was a supporter of Vice President J.D. Vance.
Business Insider reported in August that Erebor’s fundraising memo told potential investors that Lucky’s “political network” and the bank’s close ties to regulators would ensure approval by the end of 2025. “Mr. Palmer’s political network will get this done,” the paper said in the memo.
A source close to Erebor said there was “no special treatment” from the Trump administration during the confirmation process, adding that Lackey “never requested or called anyone in the government in that capacity.” The person said the memo was “unauthorized” by the company.
Adam Cohen, a partner at Skadden, the law firm that filed Erebor’s bank application with the Office of the Comptroller of the Currency, recently left the firm to join the OCC, according to a post on his LinkedIn profile. Mr. Cohen currently serves as Chief Counsel to OCC Secretary Jonathan Gould.
Gould said in Wednesday’s announcement that Erebor is the first new bank to receive interim conditional approval since joining the OCC. “Today’s decision is also proof that the OCC, under my leadership, is not imposing blanket barriers on banks that want to engage in digital asset activities,” he said.
Erebor is backed by $275 million in capital, the majority of which is regulatory capital held in accounts and not used for its operations. So far, its operations have been entirely funded by Lucky, officials said. The founders plan to raise further funding in the future to accelerate expansion.
Headquartered in Columbus, Ohio, with additional offices in New York, we provide digital-only customer service and market all products and services through our smartphone app and website.
Erebor’s co-founders decided to launch the bank in response to the failure of Silicon Valley banks in 2023. SVB was the main bank for American high-tech startups and their venture capital backers.
Mr. Lackey’s Anduril startup, which makes drones, sensors and other military technology, was primarily funding SVB before the collapse, according to people close to the startup.
Cryptocurrencies known as stablecoins, which are pegged to real assets such as the dollar, are expected to become a significant part of banks’ operations. The Trump administration also rescinded many of the Biden administration’s rules restricting stablecoin transactions by banks.
Erebor’s “obtaining approval so quickly reflects the company’s very conservative business plan,” said a person close to the launch. The person added that Erebor does not intend to become a “wacky techno-crypto bank.”
Sen. Elizabeth Warren, the top Democrat on the Senate Banking Committee, denounced the approval Wednesday, calling Erebor “a risky undertaking that could establish another bailout package funded by American taxpayers.”
“In a free market, credit flows fairly to businesses because they can spend their money productively, rather than to the president’s cronies because of their political connections,” Warren said in a statement.
Erebor will be led by CEO Owen Rappaport, co-founder and CEO of digital asset software company Aer Compliance, and chief strategy officer Jacob Hirschman, who previously served as an advisor to crypto group Circle. Mike Hagedorn, a former senior vice president at New Jersey-based Valley National Bank, will become president of the bank. Mr Lackey and Mr Lonsdale will not be involved in the bank’s day-to-day operations.
