Ferrofluid was invented in 1963 by Steve Papell, an engineer at NASA’s Lewis Research Center. He was trying to come up with a way to manage propellants in a weightless environment by suspending ferromagnetic particles in them.
It worked, sort of, but there was already a name for fluids with metal dust suspended in them: fouling oil. Such substances were widely used by saboteurs during WWII. It’s really not what you want to pump into a rocket engine.
Today, fluids in space are managed using elastic bladders and pressurization, or capillary action based Propellant Management Devices, and Ferrofluid is used to make neat-o pictures to illustrate Internet posts about Ferrofluid.