The 18-year-old is the youngest of two brothers locked up over a horrific 2009 attack on two boys aged 10 and 11 in Edlington in a case which shocked the nation.
The brothers were aged ten and 11 during their ferocious 90-minute attack on their two victims in a rubbish-strewn ravine in the pit village eight years ago.
He and his brother were given new identities to preserve their anonymity — like the young killers of James Bulger.
The pair were freed after serving six years and in December were granted “truly exceptional” lifelong anonymity when a judge ruled both were “committed to the path of rehabilitation”.
But 20 weeks later the younger brother was recalled to custody after being found with the blade, according to The Sun.
Critics have now demanded the teenager must lose his right to anonymity.
Probation officers are understood to have become worried about his behaviour in May, five months after he got anonymity “in the public interest.”
When they carried out a spot check they found the weapon, although there is no suggestion he had used it.
The 18-year-old was freed in December, and handed a £500,000 new identity. He is now in an adult male prison “indefinitely” while officials monitor him.
A Parole Board will at some stage decide whether he is safe to release again.
His anonymity will still be protected by a new identity, which cost taxpayers at least £500,000.
One angry source said: “It makes a mockery of the reasons for giving them both anonymity in the first place.
“The younger brother made all sorts of promises to the court and got protection for the rest of his life from scrutiny as a result.
“But a few weeks later he’s back in custody and yet he’s still protected by his new identity, all paid for by taxpayers.
“It’s secret justice of the worst kind and it’s an absolute joke.”