The recovery of hydrophobic substrates generated by industrial oily effluents and oil spills represents a growing issue. Here, we describe a low-cost, bio-based, and environmentally friendly method for the mitigation of oil-induced water pollution. We demonstrate that a marine thraustochytrid strain could survive and utilise a record 120 g/L waste cooking oil (WCO) under highly saline conditions. Moreover, the thraustochytrid strain could convert this low-quality oil into high-quality microbial lipids rich in docosahexaenoic acid (DHA) and squalene. DHA and squalene levels were further improved via the co-utilisation of hydrophilic and hydrophobic substrates via de novo and ex novo fermentation. Hydrophobic substrate such as WCO, and volatile fatty acids (VFAs) as hydrophilic substrates generated via acidogenic fermentation increased the DHA content to 40% of total lipids and squalene to 40.47 mg/L. These values are much higher than the 23.96% and 30.21 mg/L obtained with simultaneous de novo and ex novo fermentation using glucose and WCO. The presently described method for producing nutraceutical compounds has two important benefits: (i) it enables the bioremediation of hydrophobic waste from marine environments, and (ii) it offers a sustainable and economical alternative to the use of fish oils and liver from deep-sea sharks as sources of DHA and squalene.