Palmer Luckey aims to revive tech banking with crypto-friendly ‘Erebor’ startup: sources

Palmer Luckey — whose fast-growing defense firm Anduril is set on revolutionizing modern warfare – is now backing an ambitious, crypto-friendly banking startup that aims to rethink the world of finance, The Post has learned.

The 32-year-old tech mogul is backing a fledgling financial firm that aims to provide stability for Silicon Valley — and which is focused mainly on helping tech entrepreneurs build their businesses versus maximizing returns on deposits, insiders said.

The startup is tentatively being called “Erebor” – a reference the mountain where the dragon Smaug stores his hoard of gold in J.R.R. Tolkien’s “The Lord of The Rings” prequel “The Hobbit” – but the moniker is not final and could change, the sources said.

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In addition to cash, sources said Erebor aims to handle deposits in stablecoin, a class of digital currency with value directly pegged to a “stable” asset, like the US dollar or gold.

Luckey — who famously created the Oculus VR headset and whose net worth is pegged by Forbes at $3.6 billion — is partnering on the bank startup with tech investor Joe Lonsdale, sources close to the project told The Post.

Lonsdale’s venture firm 8VC is leading a $225 million fundraising round for the startup – cash that will be used to meet federal regulatory requirements for launching a bank, sources said.

The startup’s expected post-money valuation couldn’t immediately be learned.

Reps for Luckey and Lonsdale — who each will take a seat on the new firm’s board of directors, according to sources — did not immediately comment.

The Erebor project is in its early stages and the plans have not been finalized, the sources added. The partners have yet to set a date to start up operations.

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While Luckey is a cofounder, he is not expected to hold an executive role or to be involved in day-to-day operations at Erebor. The names of other cofounders and venture firms involved in the initial fundraising round couldn’t immediately be learned.

Talks about Erebor began soon after the sudden collapse in 2023 of Silicon Valley Bank — once the go-to bank for tech startups and venture firms, sources said. 

eventually moved in to guarantee deposits in order to avert a full-blown financial crisis.

Offering stablecoin deposits and support will allow Erebor to offer constant service even during bank holidays – providing flexibility for nimble startups, sources said.

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Stablecoins have gained wider adoption in recent months as President Trump embraces a lighter regulatory approach toward digital currencies.

Stablecoins are seen as a less volatile investment option than cryptocurrencies like bitcoin, which can experience major price swings during periods of market instability. Congress is close to passing the GENIUS Act, which would establish a regulatory framework for stablecoins.

Luckey and his allies also are seeking an alternative to traditional fractional reserve banking – where banks deploy most of their client deposits while keeping only a relatively small amount in reserve at any given time.

The group wants a conservative balance sheet and have considered imposing a maximum limit on loan-to-debt ratio, potentially in the ballpark of 50%, sources familiar with internal discussions said.

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One concept under consideration is to offer a bank account with covenanted one-to-one deposits – meaning any assets stored at Erebor would be kept there untouched, the sources added.

The startup would mark another venture for Luckey, whose firm Anduril competes directly with traditional defense contractors like Lockheed Martin and Northrop Grumman. Anduril recently secured a $30.5 billion valuation in a round backed by Peter Thiel’s Founders Fund.

The name Anduril is another “Lords of the Rings” nod, referencing the fan-favorite character Aragorn’s sword.

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Luckey sold Oculus VR to Facebook in 2014 for $2 billion. The tech entrepreneur was later controversially fired from Facebook in 2017 after he donated $10,000 to a pro-Donald Trump group.

In a major twist, Luckey recently ended his feud with Meta’s Mark Zuckerberg.

The pair announced that Meta and Anduril will team up to develop AI-powered augmented reality and virtual reality devices for use by the US military.