Erebor Becomes First Bank OK’d Under New Administration

Startup-focused lender Erebor has become the first bank chartered under the second Trump administration.

The bank aims to fill the void left by the 2023 implosion of Silicon Valley Bank, which catered to tech companies, founders and venture capital outfits, The Wall Street Journal (WSJ) reported Friday (Feb. 8).

Erebor, which is named for the dragon-guarded mountain of treasure in “The Hobbit,” is launching with $635 million in capital, the report added. The bank is the “brainchild” of Palmer Luckey, one of the tech industry’s early supporters of Trump, WSJ said.

According to the report, Erebor has lined up a handful of potential defense and industrial tech-focused clients who say they want to work with a bank that grasps their needs. Among these customers are companies that construct AI-powered factories, a robotics startup, and a space company developing a way to make pharmaceuticals in low gravity.

“You can think of us like a farmers’ bank for tech,” said Luckey, who will sit on Erebor’s board but won’t have a role in operations. “I think most farmers’ banks won’t claim that they’re the best bankers in the world, but they do understand farmers.”

Meanwhile, Erebor is also pushing into the defense and aerospace sectors. Luckey is CEO of Anduril Industries, another J.R.R. Tolkien reference, which develops technology for the American defense industry.

As WSJ noted, Erebor said in its pitch to investors last year that it plans to offer lines of credit backed by crypto or private securities and loans for advanced AI chips. While banks might see such loans as risky, Erebor has said its grasp of its customers’ businesses will let it more accurately determine their risks and provide more attractive loan terms.

Luckey cited the example of his bank’s understanding of specialized assets such as machine tools used to manufacture high-precision components.

“You can predict the value of those very, very well,” he said. “We know that nothing’s going to come out of the sky and make those worth half of what they are next year.”

In offering conditional approval of Erebor’s license last year, Comptroller of the Currency Jonathan V. Gould said the decision demonstrates his commitment to “a dynamic and diverse federal banking system” and proves that the OCC under his guidance “does not impose blanket barriers to banks that want to engage in digital asset activities.”