They tend to come in on live rock most often but if you started with dry it must have come in on a frag.
You shouldn't need to replace sand and rock if you can capture him. But it may take some taking apart. I would try baiting him out first. Get him to come mostly out then snatch him with a grabber or tongs. He may frequent that tunnel you saw him in. Some species can secrete mucus to create tubes of substrate.My main concern is that its in the sand and not in the rock. A little nervous that I am basically going to have to rip the tank apart with new rock and sand to get it.