Donald J. Trump and other Trump-owned entities (defendants) offered $675,000,000 in first-mortgage investment bonds to the public at an interest rate of 14 percent in November 1988, with the goal of raising capital to build and open the Taj Mahal casino in Atlantic City. The prospectus accompanying the bond issuance estimated costs at $805,000,000, with sources of income coming from the bonds, a capital contribution by Trump, and loans. The prospectus indicated that the defendants believed the funds generated from the operation of the Taj Mahal would be sufficient to cover all of the debt services. The prospectus also included cautionary statements, including the fact that the scale and size of the venture were unprecedented and that there were a variety of risks, including a high level of competition and a peak season of business only in the summer. The defendants ended up filing for bankruptcy. Sidney Kaufman (plaintiff) had purchased bonds from the defendants and subsequently sued individually and on behalf of a class of bond purchasers (plaintiffs), claiming that the text of the prospectus was materially misleading in violation of the Securities Act of 1933, 15 U.S.C. § 77a, and the Securities Exchange Act of 1934, 15 U.S.C. § 78a. The district court dismissed the complaint, and the plaintiffs appealed.