Douglas Harper's Etymology Dictionary
American English black slang, "white person," 1925, of unknown origin. If, as is sometimes claimed, it derives from an African word, none corresponding to it has been found. Perhaps the most plausible speculation is Yoruba ófé "to disappear" (as from a powerful enemy), with the sense transferred from the word of self-protection to the source of the threat. OED regards the main alternative theory, that it is pig Latin for foe, to be no more than an "implausible guess." Sometimes shortened to fay (1927).
Wiktionary
a. (context US pejorative slang English) white, white-skinned. n. (context US pejorative slang English) a white person.
Usage examples of "ofay".
The cell was packed, with tired men, unhappy men, spade cats and ofay, handsome men and warped-looking creatures, sick guys lying on their sides on the cement floor, and jaunty swinging hipsters with knees pulled up on the bench, chewing gum and laughing to themselves.
When she came out, a towel wrapped around her shining, voluptuous body, she saw that the motherfucking ofay had placed a pair of his pyjamas on the bed.
Tennessee or someplace with all the ofays to work in a car factory and make a living.
Lloyd turned his head to check on 379 Jerome by the counter, Jerome looking like he was loving it, fascinated by the ofays, how they went about it.
He did say that most ofays looked alike to him, white like something dead, but he is never going to forget your face.