The Russian denial would've had a sliver of credibility had they not gone too far: 

"Vladimir Putin’s spokesman Dmitry Peskov... called the report “pulp fiction” and denied that the Kremlin collects compromising information on anyone..."

The use of "honey traps" is well documented in intelligence circles and beyond.

http://www.thedailybeast.com/articles/2016/07/30/the-epic-honey-trap-a-classic-case-shows-just-how-far-moscow-will-go.html

In fact, Trump's son-in-law's father, Charles Kushner, even tried to use one to intimidate a witness during a trial. He was convicted of witness tampering, among other things.

https://en.wikipedia.org/wiki/Charles_Kushner