Graves is retired by the time the Harry Potter series happens. When he hears about Grindelwald's death, though, he feels compelled to attend the funeral, if only to make sure his former captor is really dead. When he gets there, he's one of the few attendees, so he gets a good look at the corpse, and realizes that it's not Grindelwald at all, but someone else who's been transfigured to look like Grindelwald.

Note: It's up to filler where this leads. Maybe Grindelwald has partially reformed by this point (I'm assuming he wouldn't be fully reformed or he wouldn't have faked his own death using someone else as a stand in for him), or maybe he's still the evil Grindelwald we all love. Maybe he broke out to live his life in peace, maybe he wants revenge on Voldemort for bringing about Albus's death, or maybe he wants to take over the world again. Also, Graves/Grindelwald, consensual or not, is fine, but not mandatory.