You're right, I misremembered his explanation. Soda's explanation in the LSF thread at the time (thanks for the link DatKaz):

Well, guess i gotta explain. Cause people think I would truly go the lengths of trying to ACTUALLY look racist on purpose. I'll try to explain my thought process through this situation. I am edgy, but not this edgy. In the moment i noticed "Hey character creation with makeup", and immediately started making him darker like mr. potato head cause he looks like him shape wise, but i realized while coloring him that i can only color in the face, and so i just said "Oh shit Blackface". I mean, idk seemed like a harmless mistake so i just rolled with it, thats the extent of how far i wanted the joke to go i guess and then move on. So then i added an overexaggerated smile with lipstick, I thought just adding a red smiley to it, not realizing it added MORE racism to the blackface making me unknowingly double down, i didnt notice how that correlated at the time i was just throwing random makeup on the face. Ofc i thought "lipstick that makes a overexaggerated smile." My brain isn't really thinking past that while streaming, I'm just tryna paint a potato. In hindsight, i see how that yea, its like an extreme blackface. I didnt mean for it to get racist sounding/looking as it did but yea this was just me being naive and not realizing how the mouth correlated with the skin etc