Michelle Wolf at 2018 White House Correspondents' Dinner

I think, between Wolf's voice and accent, it wasn't clear what she'd said about Sanders and people misheard it. In the video, I heard "she burns her fat and...." Which as a joke makes no sense and isn't funny, but perhaps you take away the idea she said something about Sanders being fat. The transcript says the joke went:

I actually really like Sarah. I think she’s very resourceful. Like she burns facts, and then she uses that ash to create a perfect smoky eye. Like maybe she’s born with it, maybe it’s lies. It’s probably lies.

That makes a little more sense, though the joke still isn't clever or funny. No mention of her looks, but 'facts' and 'fats' sound so much alike that people probably just misunderstood and didn't bother to seek clarity.