The wire it's self doesn't look to be damaged, looks to be just the insulation. I'd just heat shrink it and use it after testing the resistance, but it should be fine.
send that thing back! get a new one. i dont care if it works perfectly well. not worth the risk.
comp specs- too lazy to make a cool looking sig... MB:GIGABYTE GA-MA790XT-UD4P, AMD Phenom II X3 720 Black Edition 2.8Ghz, CORSAIR TW3X4G1333C9DHX 4GB PC3-10666, ASUS Radeon HD 4870 512MB, SB audigy gamer, WESTERN DIGITAL Caviar Black 500GB, antec P180 case (extra 120mm fan and 80mm fan), Corsair HX Series 620W: ASSEMBLED June 2009