Palmer Luckey Backs New Crypto-Friendly Startup Erebor

LOS ANGELES, CA – Palmer Luckey, founder of the defense firm Anduril, is backing a new startup named Erebor aimed at rethinking banking for tech entrepreneurs. The firm is designed to provide financial stability in Silicon Valley and to help entrepreneurs build their businesses.

Erebor, named after the mountain from J.R.R. Tolkien’s “The Hobbit,” is exploring options to accept deposits in stablecoin, a type of digital currency pegged to stable assets like the US dollar or gold. Luckey, who has a net worth of $3.6 billion, is partnering with tech investor Joe Lonsdale, whose firm 8VC is leading a $225 million fundraising round for startup operations.

Sources indicate that this funding will help Erebor meet federal regulations for launching a bank, although specific details about its post-money valuation are not yet available. Representatives for both Luckey and Lonsdale did not provide immediate comments on the venture.

A source familiar with the project mentioned that while Luckey is a cofounder, he will not take on an executive role or handle daily operations. The startup is in its early stages, with plans still being finalized and a launch date yet to be determined.

The idea for Erebor began following the collapse of Silicon Valley Bank in 2023, which left many clients unable to access their funds. The new startup aims to offer stablecoin deposits, which could provide continuous service even during bank holidays, benefiting startups looking for flexible banking solutions.

Stablecoins, considered less volatile than traditional cryptocurrencies, have gained traction as lawmakers, including Congress, move towards establishing a regulatory framework for such currencies. Luckey and his partners also intend to explore alternatives to fractional reserve banking, aiming for a conservative balance sheet and proposing a possible maximum loan-to-debt ratio of around 50%.

Furthermore, there is a plan to maintain a one-to-one deposit system, which would ensure that client assets remain untouched at Erebor. This venture signifies another step for Luckey, who has previously sold Oculus VR to Facebook for $2 billion and recently mended his relationship with Meta’s Mark Zuckerberg. Together, they have announced collaboration on AI-powered augmented reality and virtual reality technologies for the US military.