FTX Bankruptcy Claims Bolster Gains for Hedge Fund Diameter

A large bet and a quirk in the bankruptcy proceedings following the chaotic collapse of Sam Bankman-Fried’s FTX crypto exchange is resulting in bumper profits for hedge fund Diameter Capital Partners.

The firm initially wagered that claims on assets of the exchange — which is under Chapter 11 bankruptcy protection following a fraud-fueled implosion — would fetch more than 20 cents on the dollar. Instead, they have surged to more than 100 cents.

The trade was the biggest contributor to gains in two of Diameter’s key funds during the second quarter, and remain a large position for ...