SFDCT uses the same system SFD uses for localization, that is, text is stored in an XML file and later accessed and formated with arguments in-game.

Here's a snippet of SFDCT's SFDCT_default.xml language file:

<Texts name="Default">
    <!--  ...  -->
    <Text id="sfdct.command.servermouse.message">Server-Mouse set to {0}</Text>
    <Text id="sfdct.command.servermousemoderators.message">Server-Mouse moderators set to {0}</Text>
    <Text id="sfdct.command.addmodcommands.header">Adding moderator commands...</Text>
    <!--  ...  -->
</Texts>

Inside there are <Text> elements with an id that define texts. In these texts there are arguments that are later replaced with other text in-game, such as {0}, {1}, etc.

To create a new language file copy the default one and rename it to something else. Like SFDCT_mynewlanguage.xml. Now you can freely edit or translate the contents shifting the arguments about depending on the text as some languages may not have the same "syntax" as English.

Here's a snipper of a modified language file.

<Texts name="CustomDefault">
    <!--  ...  -->
    <Text id="sfdct.command.servermouse.message">the sv mouse has been set to {0}</Text>
    <Text id="sfdct.command.servermousemoderators.message">no sv mouse mods is {0} from now on</Text>
    <Text id="sfdct.command.addmodcommands.header">creating moderator wizard spells...</Text>
    <!--  ...  -->
</Texts>

Inside SFDCT settings panel, or in the config.ini file there's a Language setting that holds the name of the language file to be used, by default it is set to SFDCT_default. Set it to the name of your file without the .xml extension and restart SFDCT. If the file is not found an error message will appear on SFDCT's console and the language will be reverted to SFDCT_default.