Sega is investigating a massive fraud by the former head of mobile content at its Segatoys division in Japan.
The news came as the Sega group reported its profits were up by 200 per cent to £151.8 million, despite a drop in video game sales.
Sega said the unnamed culprit had been "conducting inappropriate transactions with multiple business partners," using fictitious accounts in the Segatoys name, according to games news site Spong.
The fraudster is alleged to have forged documents in order to carry out unauthorised deals totalling more than £3 million.
The company is setting aside 420 million yen, or £4.5 million, to cover the potential cost of sorting out the financial mess created by the deals.
The fraudulent transactions were carried out over a two-year period between March 2008 and March 2010, when the employee retired under Sega’s voluntary buyout option.
The ex-employee is said to have come forward voluntarily to admit his dealings on 5 April.
"We deeply regret that such inappropriate transactions occurred within the Group," parent company Sega Sammy Holdings said in its end-of-year report. "We express our sincerest apologies to our shareholders, investors, business partners and other affiliated parties for the enormous inconvenience and concerns this incident may cause."
Sega is said to be considering criminal charges against the ex-employee. The company may also pursue others on conspiracy charges.