Gray, 47, a former leader of the Ulster Defence Association in the east of the city, was recently released on bail on charges of money laundering.
He was shot at a house on Clarawood estate after answering the door to two gunmen at about 2000 BST on Tuesday.
He had been living in the house in Knockwood Park with his father since being freed on bail. Gray was expelled from the UDA leadership in March.
The police have refused to comment on claims that he was given some police protection after being freed on bail, reports BBC.
Police said the murder was unrelated to the feud between the Ulster Volunteer Force and Loyalist Volunteer Force which has claimed four lives in recent months, but was "housekeeping" by the UDA which expelled him from the organisation earlier in the year.
It is thought he may have been ready to provide information on their paramilitary empire in return for a lighter sentence.
He was not a difficult target to find - his address was well known and the terms of the High Court bail set last month put him under virtual night-time curfew in his house. He was also ordered not to leave Northern Ireland and had to report to the police five times a week.
Gray survived a previous murder bid when he was shot in the face during a deadly feud within the UDA in 2002, informs the Mail.