🚨 BREAKING: Palmer Luckey's Erebor Bank has passed $7bn in deposits.

Erebor is the national bank Luckey and Joe Lonsdale built to fill the hole SVB left.

The FT reports it added more than $3bn and 500+ new customers in the past quarter, on top of the $4.06bn in its June call report.

That's

• $1.1bn in March,
• $4bn in June,
• $7bn now,

and a $6m average new account.

It's raising $1.5bn at an $8bn pre-money valuation.

It also just ended free stablecoin redemption at par for everyone but big depositors.

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The deposit growth is forcing the raise.

Erebor has to hold a 12% leverage ratio (per its granted charter), so a balance sheet this size needs roughly $900m of capital. It had $597m at the end of June.

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As is the "at par redemption of stablecoins"

Stablecoin redemption at par costs money to provide. Tether charges 0.1% for it. Erebor charged zero. The fix tells you what the product is.

Wintermute and Galaxy Digital taught Erebor a stablecoin lesson in arbitrage.

At launch, Erebor let customers turn USDC and USDT into dollars at $1 per token, free. Tether charges the greater of $1,000 or 0.1% for direct redemptions. Erebor charged nothing.

So Wintermute bought USDT a fraction below $1, sent it to Erebor and collected the full dollar. Rinse and repeat.

Galaxy Digital ran the same trade (per The Information).

Erebor told them to stop, but then kept free conversion for customers with sizable deposits, and put volume fees and limits on everyone else.

Traders gonna trade 🤷‍♂️

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This bank still isn't lending. At all.

The Q3 call report lands by the end of October, and that's where we'll see how much of the $7bn is cash at the Fed and how much is lent out, if any.

I can't think of another de novo that has grown like this.

It's a huge success story. And it absolutely can raise, and solve problems for clients along the way.

What I'm *fascinated* by, is if they can become sustainable along the way.