A lawsuit launched by District of Columbia (DC) Attorney General Karl Racine alleges that Mr Trump's real estate business and other entities misused the funds to enrich the Trumps.
Mr Trump's Washington hotel is alleged to have been "grossly overpaid".
Ivanka Trump has denounced the case as "politically motivated".
In a tweet she shared a screengrab purported to be of an email in which she suggested the hotel be paid a "fair market rate".
"This 'inquiry' is another politically motivated demonstration of vindictiveness and waste of taxpayer dollars," she said.
The White House has not yet commented.
However, the inaugural committee has said its finances were independently audited and none of the money was spent unlawfully.