FTX US is acquiring equities clearing startup Embed Financial

FTX US, the American subsidiary of global crypto exchange FTX, is acquiring equities clearing firm Embed Financial in a move to enhance its newly-launched stocks trading offering.

FTX US and Embed Financial are not new to each other. When FTX US announced last month that it would begin offering stocks, it said Embed will provide it custody, execution and clearing services for securities. Embed is an independent registered broker-dealer and a member of the Financial Industry Regulatory Authority (FINRA).

Terms of the deal weren't disclosed, but Embed has raised around $40 million in total funding to date and is valued at up to $120 million, according to Dealroom estimates.

Embed founder and CEO Michael Giles confirmed the firm's total funding to The Block but declined to comment on the valuation and the deal size. FTX US president Brett Harrison declined to comment on whether the deal will be financed via cash, equity, tokens or a mix of those things.

The deal is subject to FINRA approval, said Harrison and Giles, declining to comment on the expected timeline of deal closure.

FTX Stocks

FTX US debuted its stock trading functionality, FTX Stocks, last month for select customers in private beta. The public release, limited to the US, is expected later this summer.

The acquisition of Embed will help FTX US offer the stock trading functionality to other firms, said Harrison.

"Embed and FTX US together can provide combined stocks, options and crypto white-label services to broker-dealers," he told The Block. "These businesses may be trading and investing apps, or they could be neo-banks or other fintechs looking to add such services as add-ons to their core functions."

As part of the deal, all 32 employees of Embed will stay on through the acquisition, said Giles and Harrison. Giles will continue to stay on as CEO of Embed, and Embed will continue to operate independently, said Harrison.

Embed is Giles's second startup to be acquired by a high-profile company. In 2015, he founded Third Party Technologies, an investing API platform, which was acquired by Jack Dorsey's Square (now Block) in early 2019. Following the acquisition, Giles remained the CEO of Cash App Investing until December 2019, according to his LinkedIn profile.

The Embed acquisition comes six months after FTX US raised $400 million in its first funding round at an $8 billion valuation. This is FTX US's third acquisition to date, after LedgerX and Good Luck Games.