A group of high-profile tech investors, including military tech entrepreneur Palmer Luckey and venture capitalist Joe Lonsdale, is preparing to launch a new bank designed to serve the niche left behind by the collapse of Silicon Valley Bank — and to do so with ambitions that extend deep into cryptocurrency, defense tech, and artificial intelligence.
The bank, to be called Erebor, has formally applied for a national banking charter in the United States, according to documents made public this week. Named after the “Lonely Mountain” in The Lord of the Rings, Erebor would aim to serve the "innovation economy" - start-ups and individuals in sectors often viewed as too risky for traditional lenders, including blockchain, AI, defense, and advanced manufacturing.
Erebor’s founders, who include backers of Donald Trump’s 2024 presidential bid, say their institution will fill a gap left by SVB’s 2023 collapse, which shook the tech sector’s financial infrastructure. That failure triggered panic among start-ups, many of which relied heavily on SVB’s tailored credit offerings. Though SVB’s remnants were absorbed by First Citizens and some staff migrated to HSBC, entrepreneurs and investors continue to complain of tightened credit access and fewer bank partners willing to underwrite emerging technologies, FT reports.
Erebor’s co-founders first discussed launching a bank after the collapse of SVB in 2023, according to a person close to the matter. SVB had been the main bank for US start-ups and their venture capital backers.
Its assets were sold to First Citizens, which has since relaunched SVB, and a number of its bankers moved to HSBC in the US. But investors and executives complain about a gap in banking services for fledgling tech companies since SVB’s demise — with some start-ups struggling to get the same access to capital. -FT
The application describes Erebor as “a national bank… providing traditional banking products, as well as virtual currency-related products and services, for businesses and individuals,” with a focus on customers underserved by both traditional and fintech institutions. It will also offer services to non-U.S. companies seeking access to the American banking system.
One of the bank’s major innovations, and potential regulatory flashpoints, is its plan to become a dominant player in stablecoin transactions, a controversial corner of the cryptocurrency world where digital tokens are pegged to traditional currencies like the U.S. dollar. Erebor’s filing describes its goal as becoming “the most regulated entity conducting and facilitating stablecoin transactions.”
Founders Luckey, best known for founding Anduril Industries, and Lonsdale, a co-founder of Palantir and managing partner of 8VC, are not expected to be involved in Erebor’s day-to-day operations. Instead, the bank will be led by co-CEOs Jacob Hirshman, a former adviser to crypto firm Circle, and Owen Rapaport, CEO of digital assets compliance company Aer. Mike Hagedorn, a longtime banking executive and former EVP at Valley National Bank, will serve as president.
Despite its tech-forward posture, Erebor will be headquartered in Columbus, Ohio, with a secondary office in New York City. In keeping with the start-up culture it hopes to serve, Erebor will be a digital-only bank, offering customer support and financial products exclusively through a smartphone app and website.
Much about Erebor remains under wraps. Portions of the application, including its equity structure, business plan, and shareholder identities, were submitted confidentially.
The Erebor venture underscores the ongoing realignment of financial services in the tech sector, as traditional banks grow more cautious and venture-backed firms look to build their own institutions. Whether Erebor succeeds where SVB fell — and whether its fusion of crypto, defense, and Silicon Valley politics finds regulatory favor — remains to be seen. For now, its founders are betting there’s a mountain of opportunity left to reclaim.