Wrap a couple of layers of duct tape around the tool then wet the sheath with warm water till its pliable. You can work the tool into the sheath carefully, take it out after the leather takes a set, usually a couple of hours. It may be a bit tricky to get the tool out, just use patience wiggling it out and you'll get it done. Let it dry slowly at room temperature.
You should have a nice firm holding sheath without being too tight.