Ken Sterling, Los Angeles Talent Agent & Media Attorney at BigSpeak and Sterling Media Law. USC professor on media and law.
Ever wonder why legitimate businesspeople fall for Ponzi scheme operators and cons? In popular media, they come off as slimy and obvious. In real life, they can be some of the nicest people you would ever meet.
When I was a teenager, I was taken in by a lovely family who lived on a huge gated estate with a tennis court, grotto and waterfall. It was snazzy. This was my first encounter with a Ponzi scheme operator, and to his credit, “Eric” was a wonderful human being. He loved to take care of everyone. He was generous and jovial, had a successful career and could see deals from all angles. His mind moved swiftly, and he had a way with people.
But I had no idea he was burning the candle at both ends to keep everything afloat. It didn’t occur to any of us that he could possibly be doing something wrong. We all saw the success and thought he had the golden touch, not that he was bilking investors of their money.
While I learned a lot about business—reading people, negotiating, building confidence and closing deals—from Eric, I also learned some of the ways you can spot a con artist. As a talent agent, media attorney and law school professor, I teach my students and clients how to sniff out scammers and con artists in their negotiations. Here’s what I encourage business leaders and investors to keep in mind to help ensure they’re entering deals with someone trustworthy.
Three Ways To Spot A Con Artist
Con artists may try to earn your trust using the same methods that legitimate businesspeople do, which is why they’re hard to spot. If you see all three tactics together when approaching a business deal and your “Spidey-sense” is tingling, slow down and dig deeper.
1. They look wealthy.
Eric’s biggest prop was his estate, tennis court, waterfall pool and gated drive. The image of success was so convincing that few questioned the deal. But signs of wealth are not proof of financial strength.
Ask: “This sounds incredible, and I’m interested. Walk me through the actual numbers and audited financials. Who is your auditor?” Look for independent validation of the business model or assets, not just lifestyle signals. Remember: Warren Buffett lives modestly and lets results, not props, speak.
2. They use other people to sell the dream.
Eric often brought in “friends” who looked wealthy or legitimate. Many of them were unknowingly being scammed themselves. Seeing respected peers in a deal is powerful social proof, but it can be staged.
Ask: “This is great, but could I speak with three investors who have exited successfully, not just current ones?” Confirm those references independently, outside of the circle the dealmaker provides. If you’re only introduced to people hand-picked by the promoter, consider that a red flag.
3. They support lies with truth.
Eric won confidence by being vulnerable. He shared struggles, which made people believe he was being fully transparent. But he was mixing just enough truth to disguise the lies.
Ask: “What could cause this deal to fail?” or “What’s the worst-case scenario?” Look for how the party you’re considering a deal with addresses risks. Honest partners usually own them upfront. Red flags here include minimization, vague answers or failing to provide a clear downside. When in doubt, simply do as President Ronald Reagan famously said: “Trust but verify.
Remember, legitimate negotiators also have nice homes, use testimonials from satisfied customers and share stories from their lives. However, when you start to see all these methods being employed with someone you just met, you might want to look harder at what’s being offered.
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