The rapidly growing production and usage of lithium-ion batteries (LIBs) dramatically raises the number of harmful wastes. Consequently, the LIBs waste management processes, taking into account reliability, efficiency, and sustainability criteria, became a hot issue in the context of environmental protection as well as the scarcity of metal resources. In this paper, we propose for the first time a functional material—a magnetorheological fluid (MRF) from the LIBs-based liquid waste containing heavy metal ions. At first, the spent battery waste powder was treated with acid-leaching, where the post-treatment acid-leaching solution (ALS) contained heavy metal ions including cobalt. Then, ALS was used during wet co-precipitation to obtain cobalt-doped superparamagnetic iron oxide nanoparticles (SPIONs) and as an effect, the harmful liquid waste was purified from cobalt. The obtained nanoparticles were characterized with SEM, TEM, XPS, and magnetometry. Subsequently, superparamagnetic nanoparticles sized 15 nm average in diameter and magnetization saturation of about 91 emu g−1 doped with Co were used to prepare the MRF that increases the viscosity by about 300% in the presence of the 100 mT magnetic fields. We propose a facile and cost-effective way to utilize harmful ALS waste and use them in the preparation of superparamagnetic particles to be used in the magnetorheological fluid. This work describes for the first time the second life of the battery waste in the MRF and a facile way to remove the harmful ingredients from the solutions obtained after the acid leaching of LIBs as an effective end-of-life option for hydrometallurgical waste utilization.