No, I don't believe that's what happened, and I'm not immediately sending it back in the mail because I shouldn't have to pay for shipping and be out the cost of the knife plus shipping. Especially when there may be other options.
I've sent message to the seller and they're supposed to be getting me a new sheath when they get back in the office in the coming week. Even so, Cold Steel/GSM are one now, and yes they are responsible for the warranty they put on their products.
We don't know yet whether CS/GSM will remain responsible for the warranty they put on their products.
What we do know is that they won't apply a manufacturer's warranty if you buy from an unauthorized dealer.
And I said that's not extremely unusual, as Warranty Policies vary from company to company.
The entire responsibility in this case is on your Seller. He sold you a defective item. Replace or Refund. He "should" pay for the return shipping,
but that's up to you to negotiate. The Seller should have inspected your knife/sheath before shipping out.
If having a manufacturer's warranty is crucial for you, buy from an authorized dealer. You usually will not get
as low a price as from a third party seller, but you will get Manufacturer's warranty plus the comfort of knowing
it's not a counterfeit.
BTW, I am no fan of GSM and their customer service so far looks like garbage compared to what Cold Steel CS used to be. And I have been buying
Cold Steel products since the 1980s. But in this instance blaming GSM/CS before the Seller is simply barking up the wrong tree.