[Build-It-Break-it]

From the picture it looks like the bolts are being over tightened. It looks like they're not straight but pushed outward.

I believe there's shims you can put between the bearing retainer and axle flange to take up some of the slack without over tightening the bolts.

Try a couple of washers between the axle flange and retainer to get an idea of how thick of shims you'll need.