In late 2016, as the United Kingdom football sexual abuse scandal expanded, Gradi's roles at Crewe at the time of alleged offences in the 1980s and at Chelsea in the early 1970s were the subject of media scrutiny.

[citation needed] After a period of teaching, Gradi became a London regional coach for the FA; this caused him to lose his amateur status and become ineligible to continue his playing career.

Palace chairman Ron Noades had only recently left Wimbledon himself and saw Gradi as the ideal man to save his new purchase from relegation.

[citation needed] Gradi's time at Selhurst Park was not a success, as he failed to save Crystal Palace from relegation, and he resigned the following November after a disappointing start to the 1981–82 season.

Gradi's contract with Crewe was one of the most controversial in the Football League; it included a clause giving him a percentage of the profit on any player sold to another club.

These include David Platt, Rob Jones, Geoff Thomas, Danny Murphy, Ashley Ward, Wayne Collins, Seth Johnson, Robbie Savage and Neil Lennon.

Gradi's success continued into the 2000s, when he helped players including Rob Hulse, Dean Ashton, David Vaughan, Michael O'Connor, Billy Jones, Nicky Maynard and Ashley Westwood.

[23]On 18 November 2008, Gradi resumed control of Crewe's first team on a caretaker basis after a poor start to the 2008–09 season under Steve Holland had left the club bottom of League One.

[31] On 16 November 2016, former Crewe defender Andy Woodward revealed that he had been the victim of child sexual abuse by former football coach Barry Bennell (convicted in 1998) at the club in the 1980s.

"[36][37] On 24 November, Gradi released a statement saying he knew nothing of Bennell's crimes: Also on 24 November, another ex-Crewe academy graduate Danny Murphy talked to the Evening Standard about Gradi: Similar character references were provided by former Crewe trainee, later Crewe Chronicle (and Cheshire Live) journalist, Peter Morse,[40] and former defender David Wright.

[45][46] Gradi subsequently said he had been notified by the FA of his interim suspension from football on 25 November, and reiterated "that I will do everything within my power to assist all investigatory authorities.

"[47][48] On 7 December, the BBC reported that the mother of a former Crewe youth team player wrote an anonymous letter to Gradi in 1989–90, asking him to investigate "inappropriate" behaviour whereby a member of staff "took lots of boys into his room overnight" during a weekend away in Blackpool.

On 27 February 2018, claims were made that, in 2001, a former Crewe Alexandra employee was asked by a senior official at the club to help wipe pornography off Gradi's home computer, which had been viewed by a group of Irish Under-13 players at his house.

Gradi admitted to encouraging a close player-coach culture and to not making detailed background checks about Bennell because Crewe was trying to poach him from Manchester City "on the quiet".

Club chairman John Bowler said Crewe had not appreciated the dangers of football being used as a means for a paedophile to prey on young boys ("documented procedures that are now in place for the protection of minors were not in place at that time"), while Gradi had not made detailed inquiries into Bennell's background ("He did not have any specific coaching qualifications but none were required and at the time the FA did not publish any guidance on child protection").

[52] In August 2019, Chelsea's board apologised "unreservedly" for allowing Eddie Heath, a "prolific and manipulative sexual abuser", to operate "unchallenged".

He was accused of failing to tell senior club staff about a sexual conduct allegation concerning Heath made by the parent of a young player.

Gradi denied trying to "smooth over" the matter in a meeting with the boy's father and said he had reported the allegations to Chelsea manager Ron Suart.

"[54] The FA's 700-page Sheldon report was published on 17 March 2021, identifying failures to act adequately on complaints or rumours of sexual abuse at eight professional clubs including Crewe.

Considering whether senior club people knew about Bennell, Sheldon concluded they had not received specific reports of abuse (a conclusion also reached by Cheshire constabulary).