It's a faulty cable and I'm not too surprised that you described where it had broken as looking like a cut.
It's not a fault just peculiar to KnitPicks, sometimes instead of a cut mark, you might find a 'bubble' or the plastic on the cable is raised in some way just at that particular spot.
Seems as if the machine just caught the cable in the wrong place - it didn't go clean through but just a small amount of pressure - the weight of the yarn - is enough to make it snap.
Send it back to get a replacement but before using any cable needles again, check for any kind of irregular mark about half-an-inch from the metal joins. Might be as well if you give your stash the once-over in case you find any more.
Hope this helps.