In September 2015, Women for Independence alerted police after noticing discrepancies in its accounts, prompting an investigation into campaign funds, which was publicly reported for the first time in November 2015. It was alleged that McGarry, in her role as treasurer, transferred money raised during campaign events into her personal account and used cheques made out to the campaign to deposit money into her own account, embezzling a total of £32,991. She denied all wrongdoing.

On 24 November, after the allegations surfaced, it was announced that McGarry had resigned the SNP whip and was automatically suspended from the party. She continued to sit as an independent MP.

In November 2015, following allegations of financial misconduct, McGarry withdrew from the SNP party whip while the matter was investigated. In 2016, she was charged with a number of fraud offences relating to apparent discrepancies in the finances of the SNP Glasgow Regional Association and Women for Independence.

She pleaded guilty in 2019 to two charges of embezzlement, and was subsequently sentenced to eighteen months. Her convictions were quashed later that year pending a retrial in April 2022, at which she was convicted and sentenced to imprisonment.

In January 2016, McGarry and author J. K. Rowling were involved in a Twitter row. McGarry accused the author of supporting an anonymous Twitter user with "misogynistic views". Rowling asked for an apology from McGarry and threatened legal action if it was not forthcoming.

McGarry deleted the offending tweets and apologised to Rowling.

In February 2016, McGarry was detained for questioning by Turkish security forces after she used her mobile phone near a security checkpoint in south-eastern Turkey. She stated she was "recording the sound of bombs" falling on a nearby Kurdish area.

As she was still suspended from the party, she was not selected as the SNP candidate for her seat at the 2017 Westminster general election.

In March 2016, McGarry also claimed on Twitter that the organisation Scotland in Union was "headed by an internet troll and an outed holocaust denier". This was not true, McGarry having confused Scotland in Union's head with the similarly named Alastair McConnachie.

McGarry later made a formal apology and agreed to pay £10,000 in damages in an out-of-court settlement.

In September 2016, McGarry gave a voluntary interview with Police Scotland. Following this interview, McGarry was charged with a number of fraud offences, including embezzlement of funds, breach of trust and an offence under the Scottish Independence Referendum Act 2013. It was alleged that between April 2014 and August 2015 she embezzled a total of £4,661 in her role as treasurer of the Scottish National Party's Glasgow Regional Association, and that between February 2014 and June the same year she embezzled £3,891 from funds raised for the Yes Glasgow campaign group. She was initially represented by solicitor Aamer Anwar, but subsequently changed representation.

McGarry appeared in private at Glasgow Sheriff Court on 21^st March 2018. On 21^st February 2019, she entered a plea of not guilty to three charges of embezzlement and one charge under the Regulation of Investigatory Powers Act 2000 in relation to failing to provide police with a passcode to a mobile phone seized from her. Her trial began at the court on 23^th April 2018. The following day, she pleaded guilty to two charges of embezzlement including £21,000 from Women for Independence and £4,661 from SNP Glasgow regional association. The remaining charges were dropped. She was to be sentenced in May and the Crown intends to recover the money through the Proceeds of Crime Act 2002.

On 1^st May she attempted to withdraw her two guilty pleas, but the sheriff ruled that this was not possible, and on 6 June she was jailed for eighteen months. Several days later she was released on bail pending an appeal. On 19^th December her conviction was quashed pending a retrial, following submissions by her lawyer Gordon Jackson.

Her retrial for embezzling money from two Scottish independence organisations, Perth and Kinross food bank and a charity that campaigns on behalf of people who have been through the justice system, commenced on 6^th April 2022 in Glasgow Sheriff Court. On 12^th May she was found guilty of embezzling £25,000. Sentencing was deferred.

On 30^th June 2022, McGarry was sentenced to two years' imprisonment.

On 23^rd February 2023, she appealed against conviction and sentence; the three-judge panel rejected her appeal against conviction, but held that the Sheriff had applied an excessive prison sentence and reduced the two-year sentence to twenty months. Prosecutors attempting to recover funds were told that none were available at a hearing on 7^th March 2023. In September of the same year, a confiscation order was issued against McGarry. She was ordered to pay £66.36, the "only amount available".