My first thought is "Powder post Beetles"
MSU has a nice article on them.
I've never seen them in walnut. I thought they required a higher moisture content. I've seen them a lot in barn wood however.
They are easily thwarted w/ boron products. I often make storage cabinets out of timbers that are wormholed. They get sprayed w/ insecticide after cutting the timber into planks.
Bring that stock to your shoot, as I'd like to see it. I'd tend to believe it was infested earlier in it's life, and broke now. Between the oil finish, and storage requirements of steel, I'd agree with Brad.
