It is true as far as I can tell from the original (translated) source. It was written in 1933 by a Jewish Austrian Psychologist (also communist and pedophile), and was after Hitler's Mein Kampf, with several direct responses to the work. He was very influential and helped lay down the foundations for Psychology a hundred years ago. He came directly after Freud, was a direct disciple of Freuds, was director of a major Freud clinic, and worked with Freud's children after Freud's passing. He was also (like all psychologists) a complete fraud and he believed in molesting children and that 'orgone energy' from orgasms could cure cancer.

Eg, the first hit for 'child' reads that sex and child sex is important in communism, and the only reason Marx didn't know about it is because sexology is just invented.

Hence, we are not saying anything new, and we are not revising Marx, as is so often maintained: ‘All human conditions ‘, that is, not only the conditions that are a part of the work process, but also the most private and most personal and highest accomplishments of human instinct and thought; also, in other words, the sexual life of women and adolescents and children, the level of the sociological investigation of these conditions and its application to new social questions. With a certain kind of these ‘human conditions’, Hitler was able to bring about a historical situation that is not to be ridiculed out of existence. Marx was not able to develop sociology of sex, because at that time sexology did not exist. Hence, it now becomes a question of incorporating both the purely economic and sex-economic conditions into the framework of sociology, of destroying the hegemony of the mystics and metaphysicians in this domain.

If you repress children (ie, don't groom them) they become repressed right wing fascists. Mind that this is Freud era psychology, so it truly believes that however a child is raised is how they are.

[Freud's] The third great discovery was that childhood sexuality... On the contrary, the repression intensifies it and enables it to manifest itself in various pathological disturbances of the mind.

...One becomes a bit sceptical and asks how is it possible for the masturbation of small children and the sexual intercourse of adolescents to disrupt the building of gas stations and the manufacturing of aeroplanes. It becomes apparent that it is not cultural activity itself which demands suppression and repression of sexuality, but only the present forms of this activity, and so one is willing to sacrifice these forms if by so doing the terrible wretchedness of children and adolescents could be eliminated. The question, then, is no longer one relating to culture, but one relating to social order.

The moral inhibition of the child’s natural sexuality, the last stage of which is the severe impairment of the child’s genital sexuality, makes the child afraid, shy, fearful of authority, obedient, ‘good’, and ‘docile’ in the authoritarian sense of the words.

The entire work continues this way really. There's hundreds of references to children, and the majority are about how sexual grooming/masturbation/molestation is good because it keeps them from becoming too Fascist. Grooming is inherently Jewish Bolshevism Revolutionary and cannot be adopted by fascists, therefore they must groom children. (Note: The call out is because Reich uses a particular meaning for "revolutionary" and "fascist", which does not match up with modern usage. He instead means the political blocks, "fascist" is particularly Hitler's movement; "revolutionary" is particularly international Jewish Bolshevism.)

Similar questions concern work with children. It may sound strange - to some incomprehensible - but the fact remains: In the main, revolutionary work with children can only be sex-economic work. Overcome your astonishment and listen patiently. Why is it that children in the pre-pubertal stage can be directed by sexual education in the best and easiest way? ... The usual methods employed by the freedom movement to organize children are the same as those employed by the reactionaries in their work with children: marching, singing> dressing up, group games, etc....the child does not distinguish between the content of reactionary and revolutionary forms of propaganda. To see to it that reality is not glossed over is only the first commandment of anti-fascist education. It is our contention that children and adolescents will march just as happily to fascist music tomorrow as they march to liberal music today. While it is true that political reaction is far superior in its organizational work with children, there is one thing that it cannot do: It cannot impart sexual knowledge to children; it cannot give them sexual clarity, nor can it dispel their sexual confusion. Only the revolutionary movement can do this. First of all because it has no interest in the sexual suppression of children.

The most direct statement I found from reading his work is this, which is one of the current and very influential lines of thinking for LGBT groomers. This is what they're trying to make into a reality today: mandatory grooming by law.

With respect to medicine and education, the deplorable fact will have to be corrected that hundreds of thousands of physicians and teachers hold the weal and ill of every new generation in their hands, though they know nothing about the laws pertaining to the biosexual development of the small child. And this is still the case forty years after the discovery of childhood sexuality. Fascist mentality is hourly and daily, inculcated in millions upon millions of children and adolescents owing to the ignorance of educators and physicians. Two demands shoot into the foreground at this point. First: Every physician, educator and social worker etc., who is to deal with children and adolescents will have to prove that he himself or she herself is healthy from a sex-economic point of view and that he or she has acquired exact knowledge on human sexuality between the ages of one and about eighteen. In other words, the education of the educators in sex-economy must be made mandatory. The formation of sexual views must not be subject to the hazard, arbitrariness and influence of neurotic compulsive morality. Second: The child’s and adolescent’s natural love of life must be protected by clearly defined laws. These demands may sound radical and revolutionary. But every one will admit that the fascism that grew out of the frustration of childhood and adolescent sexuality has had a far more radical and revolutionary effect, in the negative sense of the words, than the social protection of nature ever could have in a positive respect. Every modern democratic society is full of individual attempts to effect a change in this area. But these islands of understanding perish in the swath of the plague spread by the biologically rigid, moralistic educators and physicians who stand above the society as a whole.
There is not much sense in going into detail here. Each individual measure will result spontaneously, if only the basic principle of sexual affirmation and the social protection of childhood and adolescent sexuality is adhered to.

Literally thinking that he's part of the good guys because he molests and grooms kids.

It follows from this that sex-economy, which wants to liberate the natural sexuality of children, adolescents and adults from neuroses, perversions and criminality, cannot be criticized from the point of view of anti-sexual moralism, for the moralist wants to suppress and not to liberate the natural sexuality of children and adolescents.

This is what we still see today. You barely have to change the wording, and it's clear that they still believe all this. They've just gotten smart enough to not say it out loud as much.