If it is a white collar crime they might tell you, or there might be signs that you could not miss, like the execution of a search warrant at your business. If it is a drug case you probably won't know until they come and grab you.
If your friend is moving drugs he can expect to be fingered and prosecuted sooner or later. If he does not want that to happen he should find another line of work and hope that he is not too late.
Your friend may not learn of the investigation until he is arrested or has a search warranted executed at his home or business.
The system is set up so that investigations are done secretly and not intended to be known. The exception to this is if law enforcement sends out word to someone intentionally so that the individual will come in and cooperate against a bigger target. Obvious signals such as finding out that the DEA or ICE or some other agency is inquiring with your employment or with your contacts, discovering bank records are being subpoenaed or learning that witnesses are being subpoenaed to a Grand Jury are pretty tell tale signs. Undercover agents and confidential informants are routinely used, so it's best to have your friend retire, not talk to anyone further and immediately seek the advise of local counsel. Federal cases can take years to investigate and are often made historically...meaning that the government can prosecute based on the cumulative word of witnesses over time. Also, if your friend suspects someone is cooperating against him, he simply needs to leave that person alone. He shouldn't approach, threaten or in any way attempt to influence the possible witness. The government is extremely harsh on such actions and doing so could greatly increase the chance of prosecution and much harsher penalties.
Most people learn that they are under federal investigation because they are questioned by federal law enforcement agents or are notified by others that those agents have been inquiring about them. People who are investigated for financial crimes often receive a letter from a federal prosecutor that they are the target of a federal investigation with an invitation to testify before a grand jury or to discuss the matter prior to its being presented to a grand jury. However, because federal prosecutors tend to treat alleged drug offenders as dangers to the community and risks of flight, narcotics investigations are often kept much more secret. If your friend has committed a drug crime and is concerned about certain persons that he or she encountered during the commission of the offense, your friend should discuss the matter with an attorney who is experienced in defending federal criminal cases to determine the best course of action. Waiting to be indicted is never the correct choice.
Joshua Sabert Lowther, Esq.
NATIONAL FEDERAL DEFENSE GROUP
Generally speaking, you do not know whether someone is being investigated (unless he is brought in for questioning) and, by statute, grand jury proceedings are secret. If you are a drug dealer, though, a red flag that you are under federal investigation is if you are arrested by local authorities, but then released without charges. I have written an article about how the feds investigate drug conspiracies. You may read it at: http://www.jensendefense.com/articles/drugconspiracy.html
This answer is for informational purposes only. By answering this question, no attorney/client relationship is created. Although the legal information is accurate, it may not be appropriate for your situation. The best way to handle any legal problem is to seek the advice of an attorney.