Garden Pests and Diseases: japanese maple mystery problem, please help, 2 by jojob

jojob wrote:
I recently purchased this coral bark JM. Before purchase, it looked perfect, and I didn't notice that a central leader was cut off. I called the seller about the amputated leader, and he said no worries, it will still reach full growth potential.

Now, I've noticed a white, crescent-shaped fringed growth coming from leader that was cut, and I see caterpillar-like bugs around it. Also, some of the leaves are turning, which you might be able to see in the photo of the entire tree. I haven't planted it in the ground yet. Is this a fatal problem? Should I get my money back and get another?

This is really upsetting me, and your help will be most appreciated!