The crypto trap that won’t let you sell — and how to avoid it

Key takeaways

• Honeypot scams lure investors with fake liquidity, price movement and hype, but the contracts are rigged to prevent exits, locking funds permanently.

• Modern honeypots include tampered cold wallets sold via platforms like TikTok, preloaded with private keys that scammers use to steal funds instantly.

• Variants like high sell tax honeypots and “honeypot-as-a-service” kits make it easier than ever for scammers to target even experienced users.

• Test-sell before committing funds, scan smart contracts, avoid sudden hype and always buy wallets from official sources to avoid getting trapped.

In the fast-moving world of decentralized finance (DeFi), scams are evolving as quickly as the tech itself. One of the most deceptive and dangerous is the honeypot crypto scam. 

If you’re new to trading tokens or even a seasoned investor looking for the next memecoin, understanding what a honeypot is could save you from becoming the next victim.

Honeypot crypto scam explained

A honeypot crypto scam is a type of smart contract trap. It allows users to buy a token, but silently blocks them from selling it, effectively locking up their funds. From the outside, everything looks functional: There is liquidity, price movement and transaction history. Still, once you buy in, there is no exit.

You can purchase the token, but when you try to sell it, the transaction fails silently or is blocked. Your funds are locked in the contract, and the only wallet allowed to withdraw or transfer tokens is the scammer’s own.

Honeypots are built using carefully engineered smart contracts, typically on Ethereum or BNB Smart Chain. Scammers exploit the flexibility of Solidity (the programming language behind Ethereum) to embed malicious logic into the token’s code. Some of the common tactics include:

• Overriding transfer or sell functions: Only the scammer’s wallet address is allowed to execute sales.

• Excessive sell taxes: Selling incurs a 100% fee, leaving you with nothing.

• Hidden blacklists: The contract silently blacklists any buyer from reselling.

• Fake liquidity pools: The appearance of liquidity is simulated, but not real or accessible.

What makes honeypots especially dangerous is that even tech-savvy users can fall for them. Tools like Etherscan or BscScan may show the contract as verified, and price charts can display realistic activity. However, unless you review the smart contract code line by line or use automated auditing tools, the hidden trap can go unnoticed.

In short, a honeypot scam isn’t just a bad investment; it’s a rigged game where the house always wins.

How honeypot crypto scams work

Honeypot scams in crypto are designed to trap investors by using smart-contract trickery. They follow a three-stage process, and understanding how it works can help you avoid losing your funds.

1. The attacker sets the trap (deployment)

The scam begins when an attacker deploys a malicious smart contract on a blockchain like Ethereum or BNB Smart Chain. This contract is made to look like a normal token with liquidity, price charts and sometimes even fake community engagement. It may show up on popular DEX tools or be promoted in Telegram groups and X threads to gain trust.

Like a baited trap, everything is carefully set up to appear safe and profitable.

2. Victims take the bait (exploitation)

Once investors buy the token, the hidden restrictions in the contract kick in. These include disabling the sell or transfer functions for everyone except the scammer’s wallet. From the victim’s side, it looks like they made a successful purchase, but when they try to sell, the transaction silently fails.

There’s no warning. No error message. Just locked funds.

To outsiders, the token still appears active with “real” buyers, giving the illusion of a growing project. But in reality, every buyer is stuck. This phase exploits FOMO (fear of missing out) and social proof to attract more victims.

3. The scammer drains the profits (withdrawal)

Once enough people have invested, the attacker, whose wallet is the only one allowed to sell, dumps the tokens or withdraws the liquidity pool, cashing out the victims’ funds. Since no one else can exit, the token crashes to zero, leaving investors with worthless assets.

The entire scheme is coded into the contract from the start. It doesn’t depend on market trends or team behavior; it’s a technical trap built into the blockchain.

Types of honeypot scams in crypto

Honeypot scams in crypto aren’t one-size-fits-all. Scammers use different tactics to trap investors, all designed to look legitimate on the surface, but with no real exit once you’re in. Below are the most common types of honeypots:

• Smart contract honeypots: These scams let you buy tokens but secretly block selling through the contract code. Only the scammer’s wallet can exit, while others are stuck holding worthless tokens. Everything looks normal at first: price movement, liquidity and active trading, but it’s a trap built from the start. Tools like Honeypot.is can help detect this trick before you invest.

• High sell tax honeypots:  In this setup, selling is technically allowed but comes with a massive fee, often up to 100%. When you try to cash out, you either lose most of your funds or get nothing. These deductions are often hidden or disguised in the token’s smart contract. If the project doesn’t clearly explain its fees, that’s a red flag.

• Fake or pulled liquidity honeypots: Some tokens show real trading activity, but the liquidity pool is either fake or pulled suddenly after investors buy in. Without liquidity, you can’t convert your tokens back to anything of value. This trap exploits FOMO and relies on early hype to draw in victims. Always check if liquidity is locked and verifiable.

• Hardware wallet honeypots: These scams involve physical cold wallets sold at a discount, usually through shady websites or social media platforms. The wallets come preloaded with private keys already known to the scammer. Once funds are added, they’re drained remotely within hours. Always buy hardware wallets directly from the manufacturer or a verified reseller.

• Honeypot-as-a-service (HaaS):  Scammers now use prebuilt honeypot kits sold on Telegram and dark web forums. These templates include malicious smart contracts, fake trading bots and even marketing tools. They allow non-technical criminals to launch scams with just a few clicks. Projects that launch suddenly with recycled websites and identical branding may be part of this trend.

Honeypot vs rug pull: What’s the difference?

While both honeypots and rug pulls are deceptive crypto scams, they work in fundamentally different ways; recognizing those differences can help you avoid costly mistakes.

Imagine entering a store that looks fully stocked, brightly lit and filled with customers. You pay for a product, but when you try to leave, the exit is locked and the staff vanishes. That’s a honeypot.

Now imagine a different scene: You walk into a store, pay upfront for something the owner promises to deliver “soon.” But the next morning, the store is gone, signs, shelves, website, everything wiped clean. That’s a rug pull.

Both are crypto scams, but they play out very differently.

Key characteristics of a honeypot scam:

• Trap mechanism: Buyers can purchase the token, but are blocked from selling due to hidden restrictions in the contract.

• Timing: The trap is present from the very beginning. The contract is designed to deceive from launch.

• Visibility: It is often difficult to detect by just reading the code. Scammers use obfuscation or misleading naming to hide red flags.

• User experience: Victims see price movement and think the token is gaining value. But when they try to exit, sell transactions fail or are limited to nearly zero.

Key characteristics of a rug pull:

• Trap mechanism: The scammer drains the liquidity pool, leaving holders unable to trade at any real value.

• Timing: The attack happens suddenly, usually after a period of hype and user investment.

• Visibility: It is hard to predict before it happens, though signs like centralized control or unlocked liquidity can be warning signals.

• User experience: The token’s price drops instantly and dramatically. Even though selling is possible, it is too late; the value is gone.

Here’s a comparison table highlighting the key differences between a honeypot and a rug pull:

Modern-day crypto honeypot traps to be aware of

Not all crypto scams are onchain. Some start with hardware. A recent case exposed how a fake cold wallet sold via Douyin (China’s TikTok) became a modern-day honeypot. The wallet looked factory-sealed but came preloaded with a private key secretly controlled by scammers. Once the user transferred funds, over $6.9 million was stolen within hours.

These “honey traps” trick users with discounted prices and fake legitimacy. Behind the scenes, compromised devices and social media ads are being used to run professional-grade theft operations.

Always buy wallets from trusted sources, initialize them yourself, and avoid third-party resellers. Today’s crypto threats go beyond code; they target convenience, trust and human behavior.

Did you know? You can report Bitcoin scams easily using platforms like Chainabuse for global blockchain fraud or Scamwatch if you’re based in Australia.

How to spot a honeypot crypto scam

Honeypot crypto scams are designed to trick investors by looking like real opportunities. With a few checks, you can spot the red flags before you fall into the trap. Here’s how:

• Test small sells before investing big: Buy a tiny amount, then try to sell it immediately. If selling fails or is blocked, it’s likely a honeypot.

• Use smart contract scanners: Tools like Honeypot.is, Token Sniffer or DexTools can flag traps like disabled sell functions or extreme taxes.

• Check for real sell activity: If the token has only buy transactions and no sale evidence from normal wallets, it’s a major red flag.

• Watch out for 100% sell taxes: Some scams block exits using extremely high transaction fees. Check the tokenomics before buying.

• Don’t rely on “verified” contracts: A verified contract just means the code is visible, not that it’s safe. Scammers verify contracts to gain trust.

• Be cautious of sudden hype: If a token just launched and is trending with unrealistic promises, pause. Fast hype is a common honeypot tactic.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.