They are generally able to recover sync data, because it’s supposed to be synced to one or more Firefox installations (it’s specifically not a backup service).
When you request a password reset, they essentially just wipe what they have on their servers and then re-upload the data from your Firefox installations, encrypted with your new password.
Firefox Sync is end-to-end-encrypted, too. See, for example:
They are generally able to recover sync data, because it’s supposed to be synced to one or more Firefox installations (it’s specifically not a backup service). When you request a password reset, they essentially just wipe what they have on their servers and then re-upload the data from your Firefox installations, encrypted with your new password.