Moths or dye problems,,,,

I cast on to make another lovely little children's swing sweater today.  The variegated yarn is Koigu sock and the solids are Spud and Cloe sock.  I knit this pattern before and put the sweater away for future use.
It's Lene Alve's Lilliput pattern.

Here's the sweater as it came out of its bag; way too wrinkled.  Clearly it was wadded up and not folded nicely.

But that's not the problem. It could be fixed with a little steam.

This is the problem.  

See the holes in the blue stripey yarn?  

My first thought was MOTHS!!!!  However, on further inspection of the sweater and the rest of the woolens in the storage bag, I've come to the conclusion that it is the yarn.  You see, only the blue striped yarn is damaged, not the other yarns in the sweater.  I found the stashed remainder of the ball and it has breaks in the wound strands as well.  And (thank goodness) there doesn't appear to be any other sign of moth damage in any of the other woolen items at all.  I've concluded it was the dye process in the yarn.  

  Farewell sweet little baby sweater.  Your time came and went without ever being worn.  There's no saving you;  too many holes. 

So I've cast on for another.  We'll see how long it takes.

I love this little sweater pattern.