A statement released to the Australian Stock Exchange noted a recent internal review found around $16 million worth of expenses had been falsely charged to the company over the past four to five years.
The false invoices appear to have been found in the company's property arm however a review is currently being undertaken by forensic accountants to verify the amounts involved.
The statement confirmed it had begun legal proceedings and a senior employee had been stood down pending the outcome of its investigations.
The company said it would take all steps necessary to recover the funds.
The costs of the falsely charged amounts had already been paid and accounted for.
The company hit the headlines in January after slashing more than 20 jobs across its buying, design, production, property, logistics and development divisions.
Speculation over the group's financial performance intensified last year after its share price plummeted by 46 per cent between January and May to 88 cents.
Chains under the SFG umbrella include Millers, Crossroads, Katies, Queenspark, City Chic and Autograph.