The fire started around 9:30 p.m. Sunday at Ben-Menashe's home in Montreal, the Canadian Broadcasting Corp. reported.
Montreal police spokesman Simon Delorme said investigators believe the fire was intentionally set.
"There's someone -- a suspect -- which was seen leaving the house, leaving the area just a few seconds before," Delorme said.
It took about two hours and 80 firefighters to control the flames, officials said. No one was injured by the fire, but the home was severely damaged.
Ben-Menashe, who has said he is a former spy for the Israeli government, has controversial business ties, including a mining project in Sierra Leone and reported arms dealing.
Ray Liotta sues skin care company over use of likeness
Aaron Carter is still in love with Hilary Duff