Looks like you have a lot of issues going on there
The block appears to be in fairly poor condition. The head joints are disintegrating. There are some block with pieces missing.
The bottom plate is split and needs to be repaired.
The drywall needs to be replaced.
While you are doing all this work, you have a few options. You can reframe with PT, you can wrap the ends with Vycor or other peel-and-stick membrane, you can use sheet metal like Davis mentioned, you can install a ledger of top of the block of ceiling/floor height will not be an issue, or you can fasten a ledger onto the block after it’s repaired.
Way it looks right now, that block wouldn’t hold a ledger.
Or you could frame a wall on the inside of the basement, and run the joists off of that.
Are you interested in doing this right, or is this a flip?