Guide to Crypto Honeypot Scams: How to Spot and Avoid Them

Cryptocurrency is an exciting space, but it is also filled with scams designed to trap unsuspecting investors. One of the most deceptive schemes is the honeypot scam.

A honeypot crypto scam lures investors into buying a token that appears lucrative. However, once purchased, the scam prevents investors from selling, effectively trapping their funds. These scams have caused significant financial losses for many traders and investors.

In this guide, you will learn what honeypot scams are, how they work, real-life examples, warning signs, and strategies to protect yourself from these fraudulent schemes.

1. What Is a Honeypot Crypto Scam?

A honeypot is a scam in which a token’s smart contract is designed to allow purchases but restrict or block sales. Investors see an opportunity and buy in, only to realize they cannot exit their position.

How Honeypots Work

1. Project Launch – Scammers create a new token and launch it on a decentralized exchange (DEX) like Uniswap or PancakeSwap.
2. Marketing Hype – They aggressively promote it through social media, influencers, and crypto groups.
3. Investor Attraction – Investors rush in, seeing rapid price increases and big gains.
4. Sell Blockade – The smart contract contains code that prevents investors from selling.
5. Scammer Cash-Out – The scammers drain the liquidity, leaving investors with worthless tokens.

Types of Honeypot Scams

• Smart Contract Manipulation – Developers add code that blocks users from selling.
• Trading Fee Traps – Excessive taxes on transactions make it impossible to sell profitably.
• Hidden Developer Whitelisting – Only specific wallets (controlled by scammers) can sell tokens.

2. Real-Life Honeypot Scam Examples

Example 1: SQUID Token (2021)

SQUID Token exploited the popularity of Netflix’s Squid Game. Investors rushed in, but they soon realized they couldn’t sell. The developers removed liquidity and vanished with millions.

More details: BBC Report on SQUID Token

Example 2: Blockverse (2022)

Blockverse was an NFT-based gaming token that promised high returns. Investors bought in, but the developers had programmed the contract to block sales. Once enough funds were collected, they withdrew all liquidity and disappeared.

More details: CoinTelegraph Report on Blockverse

Example 3: DeFi100 (2021)

DeFi100 was a scam token where the developers brazenly declared, “We scammed you, and there’s nothing you can do about it.” The project had smart contract code that restricted sales, ensuring investors were permanently stuck with their worthless tokens.

More details: Forbes Report on DeFi100

3. How to Spot a Honeypot Scam

Warning Signs of a Honeypot Scam

• No Smart Contract Audit – Lack of third-party verification is a major red flag.
• High Slippage Requirements – If a token requires high slippage (10%+), it may contain malicious code.
• Limited Sell Orders – Investors cannot sell or experience extreme difficulty selling.
• Unrealistic Gains – If a token’s value skyrockets unnaturally fast, it may be a trap.
• Anonymous Team – No verifiable information about developers.
• Excessive Transfer Taxes – Hidden fees make it impossible to exit profitably.

Red Flags in Smart Contracts

• Sell Restriction Code – Prevents users from selling the token.
• Whitelist Manipulation – Only specific wallets can sell.
• Dynamic Taxation – Fees increase significantly when users try to sell.

4. How to Avoid Honeypot Scams

• Verify smart contract security. Use blockchain explorers like Etherscan and BscScan.
• Use tools like RugCheck.xyz to analyze token security.
• Check if the contract has been audited. Look for security audits from reputable firms.
• Avoid tokens with high slippage requirements. Legitimate projects rarely require excessive slippage.
• Look for developer transparency. If the team is anonymous, proceed with caution.
• Be wary of extreme hype. Scammers use FOMO to lure in victims.

5. Tools to Detect Honeypot Scams

• RugCheck.xyz – Scans smart contracts for honeypot risks. Visit here
• Token Sniffer – Detects fraudulent token contracts.
• Honeypot.is – Checks if a contract restricts sales. Try it here
• Bubblemaps – Analyzes token holder distribution. Learn more
• Solscan & BscScan – Helps track whale movements and token ownership.

6. Legal Actions and Regulations Against Honeypots

Regulators are taking action against honeypot scams to protect investors.

Recent Crackdowns

• U.S. SEC Investigations – The SEC has begun investigating fraudulent token projects.
• Interpol’s Crypto Task Force – Works internationally to track and shut down scam projects.
• FBI Crypto Warnings – Warns traders about emerging honeypot scams.

More on crypto regulations: SEC Crypto Enforcement

7. How to Recover If You’ve Been Scammed

1. Report the scam – File complaints with regulatory agencies and fraud departments.
2. Notify the exchange – If you purchased the token through an exchange, inform them.
3. Join recovery communities – Connect with other victims to seek legal and investigative help.
4. Improve security awareness – Learn from the experience to avoid future scams.

Conclusion

Honeypot scams are among the most deceptive types of crypto fraud. They exploit hype and investor enthusiasm while ensuring victims cannot exit their positions. Recognizing the warning signs and using smart contract analysis tools can help you avoid falling for these scams.

Stay skeptical of projects that promise too-good-to-be-true gains, always verify contract audits, and use trusted platforms for trading.

If this guide was helpful, share it with other investors to raise awareness about honeypot scams.