Coy it appears that the sheath has not yet been oiled or sealed, and if that is so, that's good. I try wetting the sheath thoroughly with just plain water and then insert the knife or perhaps a steel ruler etc to give you a firm backing and then "massage" the area with a bone folder or even a tea spoon from the kitchen. Use considerable pressure with the massage. (Much like the action of wet molding). This action will erase much of the marking, but probably not all. You can repeat the procedure several times, but the best you are likely to get is going to be some of the mark will still show. Trying to tool over the mark will be an exercise in futility, unless you plan to disassemble the sheath and then re sew it after tooling. If it is just going to be a user sheath, then I'd just leave it as is. If you do anything to break, cut, or scratch the top grain of the leather ie: a gouge then you will have a scar that will be there forever. Dying it will only accomplish changing the color of the flaw, nothing else.
Other opinions may vary.
Paul
