Michelle Legge
By Michelle LeggeHead of Crypto Tax Education
Updated Jul 15, 2025
This article has been fact checked and reviewed as per our editorial policy.

What is a Crypto Honeypot Scam?

Honeypot scams aren't new, but they're a common scam in the crypto market. Learn about crypto honeypot scams and how to spot the signs in our guide.

  • Honeypot scams trick users into sending crypto by offering fake rewards or access to wallets.

  • Scammers use fake tokens or wallets that require a small deposit to "unlock" funds, then steal it using bots.

  • Common scams include fake smart contracts, liquidity traps, and bogus exchanges.

  • Avoid them by ignoring shared seed phrases, checking wallet activity, and sticking to trusted, audited projects.

What is a honeypot scam?

Honeypot scams, also known as honey trapping, are a type of scam that lures targets in with a substantial reward.

These scams trick users by offering fake rewards, often from fake airdrops or large crypto "payouts." Scammers usually pose as clueless traders on platforms like X, Discord, or Reddit, claiming they need help moving funds and offering a cut in return.

They share a private key to a wallet that appears full of obscure tokens. But there’s a catch: you need to add native crypto (like ETH or BNB) to cover "transaction fees."

Once you send the funds, they’re instantly stolen using sweeper bots, automated scripts that drain the wallet. The valuable-looking tokens? Fake or non-transferable. It’s all a setup.

Even small amounts add up fast for scammers running the con at scale.

Read next: Common Bitcoin Scams

How do honeypot scams work?

Recognizing how honeypot scams work is key to avoiding them. Though they all work a little differently depending on the ‘reward’, in general, they go like so:

Step 1: Bait the victim

Scammers approach users through platforms like X, Discord, Reddit, or Telegram, posing as naive traders, new investors, or individuals claiming they received a large crypto payout or a surprise airdrop they can’t access. They offer a generous share if you help them "move the funds."

Step 2: Show the wallet with tempting assets

 To build trust, the scammer shares a private key to a wallet filled with what appears to be valuable tokens, often obscure or newly created ones. It looks like free money just waiting to be claimed.

Step 3: The transaction fee trap

Victims discover that they can’t move the tokens unless the wallet has enough native cryptocurrency (like ETH, BNB, or MATIC) to cover gas or transaction fees. The scammer then asks the victim to send a small amount to "unlock" the funds.

Step 4: Automated theft via sweeper bots

As soon as the victim sends funds, automated bots immediately transfer the crypto to the scammer’s wallet. The victim gets nothing in return; the tokens in the wallet are either fake, locked, or coded so they can’t be sold.

Step 5: Rinse and repeat

The scam is cheap to run and easy to automate. Scammers repeat it with different victims, often running dozens or hundreds of these scams simultaneously to collect steady profits in small amounts.

Types of crypto honeypots

Honeypot scams in crypto take various forms, all designed to trap users into depositing funds they can’t withdraw. Here are the most common types:

1. Smart Contract Honeypots

 These involve malicious smart contracts that let you buy tokens but block selling or impose massive fees.

  • How it works: The contract is coded to restrict sales, often allowing only the scammer’s wallet to withdraw.

  • Red flags: No verified contract code, unusually high fees, or failed sell attempts.

  • Example: A token shows price growth, but only the developer can cash out.

2. Liquidity Honeypots

 These use fake or manipulated liquidity pools on DEXs (like Uniswap or PancakeSwap) to lure investors.

  • How it works: The scammer creates a token pair (e.g., TOKEN/ETH), but the contract blocks selling.

  • Red flags: Low liquidity despite volume, no locked liquidity, or failed swap attempts.

  • Example: You buy a token but can’t sell it back due to hidden contract restrictions.

3. Fake Exchange Honeypots

Scammers build fake crypto exchanges that look real but exist only to collect deposits.

  • How it works: The site mimics a legit platform, offers great deals, but disables withdrawals.

  • Red flags: No regulatory info, unrealistic returns, poor support, or no working withdrawal feature.

  • Example: You deposit BTC into a "zero-fee" exchange and never get it back.

Read next: How to Report Crypto Scams

How to spot a honeypot scam

Honeypot scams can be sneaky, but there are clear red flags you can watch for. Here’s what to look out for, and how to stay safe:

  • Anyone sharing a seed phrase or Secret Recovery Phrase is a red flag. Legitimate users never share these. If someone gives you one claiming they need help accessing a wallet, it’s almost always a trap.

  • Suspicious wallet activity is another warning sign. Use a block explorer to check if the wallet quickly sends out any incoming funds. Repeated, automated transfers usually indicate a sweeper bot.

  • Unsolicited messages on social media are common scam tactics. If someone contacts you about crypto on platforms like X, Discord, or Telegram—especially with urgent or generous offers—proceed with caution. Bots often reuse the same message across multiple accounts.

You can avoid honeypot scams by following some simple common-sense tips:

  • Never import a random seed phrase into your wallet.

  • Check smart contracts or look for trusted third-party audits before interacting with unfamiliar tokens.

  • Use small test transactions to check if a token is transferable or has high fees.

  • Avoid connecting your wallet to unknown dApps or clicking random airdrop links.

  • Use tools that simulate smart contract interactions or scan for risks before confirming a transaction.

  • Stick to well-known projects or communities with verifiable reputations.

  • Stay informed on common scams and evolving tactics in the crypto space.

Read next: How to Avoid Crypto Scams

Koinly can help with taxes

If you’ve unfortunately been the target of a honeypot scam and lost your crypto, there is a small silver lining in your tax bill. Depending on where you live, you may be able to claim this as a loss to reduce your overall tax liability. Learn more in our guide on how to report stolen cryptocurrency on taxes.

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