Sounds like you may have chrome tanned leather and the residual chemicals are reacting with the brass. Someone gave me a fairly nice knife in a commercial sheath like that many years ago and I tossed it in a drawer and forgot about it. A friend needed a folding knife and I remembered that one and dug it out, only to find that I had to spend the day cleaning that junk out of it.
You might be able to slow down the process with some wax or other coating, but ultimately it's going to continue. If you like the knife, then toss the sheath and either do without one or make (or have made) a new sheath.